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Wednesday 19.09.2018 | Name days: Verners, Muntis

Expert: residents’ purchasing power – with a stable plus sign

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia’s economic growth in recent years has had an effect not only on the capital but also residents’ purchasing power. Local businesses’ economic activity gas increased in regions and other cities in Latvia.

Purchasing power is higher in large cities. Nevertheless, economic growth is felt everywhere in Latvia. Norvik Banka’s Kurzeme region office manager Agnese Čerņevska details the differences between businesses in the capital and regions.

Loans usually taken for marriage, travel and car purchase

Demand for loan services increases along with continued improvement of the economic situation in the country. «Demand and purchasing power differ for regions and small cities. Demand is high for mortgage loans and different kinds of leasing. Fast loans are usually taken for marriage, travel and major purchases. Car purchase is one of the most common reasons why residents turn to banks for financial support,» says the expert.

Women pay more attention to interest rate

Data from Norvik Bank show that the main criterion for residents when they pick loan service providers is interest rate in 62% of cases. «It is interesting that when picking a service provider, women pay more attention to the interest rate (67% of women and 58% of men). The survey shows that residents take the least amount of time – up to one week – to use fast loan services for unexpected life situations, such as car repairs or medical services (36%). Respondents admitted taking the longest time to consider fast loan services for education (17%), house repairs (15%), and car purchase (14%). In such cases residents take up to three months and more to make their decision,» says Čerņevska.

Fast loans – a problem in regions

The expert also mentions that when it comes to loans and residents’ economic activity, the fast loan matter cannot go unmentioned. «The negative effect fast loans have on residents’ purchasing power and the need to resolve this problem has been in banks’ sight for some time. The problem is very common in regions. Working with clients who turned to us with complaint about consequences caused by fast loans, we have noticed that often people become desperate that this problem is impossible to resolve. In such cases the bank provides free financial consultations. There is always a way to resolve financial problems. Norvik Bank has a large number of clients that have turned to us for merging fast loans. There are cases when clients had very high interest rate for their loan – up to 80%. As a bank, we are able to refinance commitments starting from 12%. This allows clients to divert their remaining funds to their needs. This also helps improve the client’s purchasing power.»

Inability to assess insolvency

«People are not always able to assess their financial capabilities. In many cases, fast loans are more easily acquired than bank services. Banks always strictly evaluate their clients’ solvency, put up specific guidelines and conditions. The bank is always open to cooperation – we are interested in the client’s ability to pay back their loan. We explain to our clients that risks should be taken into account when planning finances. People have to know how to think in advance, because risks always exist, including the risk of losing a job. Will the client be able to survive for three months with only savings until they find a new job? Do they consider the possibility of their new wage being below their last one, which may affect their ability to cover debts,» says Čerņevska.

Rational thinking required for financial matters

Norvik Bank Kurzeme region office manager says the times when banks were considered a threat should be left in the past. «Or way of thinking needs to change: banks are cooperation partners that can help residents discuss and resolve problems. Lack of knowledge causes many wrong opinions to form. Banks are interested in cooperating with their clients, and they value their ability to pay back loans. In affairs associated with money, we recommend residents to thing rationally, not emotionally. People’s opinions are worth knowing. Still, it is also important to be certain of your own opinion. Fake news have a major negative impact on formation of people’s news, especially if a large number of residents believe it. We often forget to assess information before accepting it as is and sharing with others.»

Economy grows +4.2% annually

Statistical data for last year shows a promising trend – Latvia’s economy is on a rise. Growth was observed in all industries last year. In 2017 Latvia’s economy experienced the most rapid growth in the last six years – GDP growth was 4.5%. Exports showed excellent contribution. Investment activity recovered as well. Household consumption grew more rapidly. General economic growth also affected residents’ purchasing power and economic activity, the expert said.

Businesses become more active; foundation of new companies slower

Čerņevska notes that this has been an active period for entrepreneurship. «The number of economically active businesses has been increasing steadily in the past five years, forming 14% growth. This growth will continue this year, as well. Especially rapid growth has been noticed in construction and processing industries. In spite of good economic development, the number of newly-founded companies has declined. If we look at 2017, the number of newly-founded companies has declined by 8.89%. Still, existing companies remain economically active and stable.»

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