Latviski English По-русски
Wednesday 18.09.2019 | Name days: Liesma, Elita, Alita

Hard Brexit is bad, US-China trade wars are nasty, but Germany matters most

(+1 rating, 1 votes)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU

The fallout from hard Brexit can be bad. US President Donald Trump, demanding cuts of interest rates, clashes with the Federal Reserve, calling its head «an enemy worse than China‘s Xi Jinping». And then comes Germany which economy is in the doldrums for nearly one year now. Against the unpromising backdrop, the Baltic states‘ economies, and especially that of Lithuania, are still doing pretty good and an abrupt halt is unlikely.

Banks are optimistic

SEB and Swedbank, Scandinavian banks, keep drawing a rosy picture for the region for the remainder of the year and during most of 2020, too.  Speaking of Lithuania, according to a new SEB Bank prognosis, its GDP is set to grow at a fastest rate among Baltic states this year. Notably, it will be Lithuania that will see GDP’s fastest pace in the upcoming two years, too, according to the report.

In the Nordic Outlook report released this week, the bank economists concluded that Lithuania’s GDP growth, at 4.2 percent, in the first half-year was much stronger than expected due to «surprisingly» strong net exports. In the light, Swedbank even raised Lithuania’s GDP for the rest of the year – from 3 per cent (April’s estimate) to 3.7 per cent. The Estonian GDP was tweaked by the bank from 3 per cent to 3.3 per cent, but Latvia saw a slash in its GDP, from 3.3 per cent to 2.8 per cent. Importantly, Swedbank says Lithuania’s growth in 2020 will stand at 2 per cent, meanwhile in Latvia and Estonia – 2 per cent and 2.3 per cent respectively.

So is there anything to worry about?

RE sector does not register any tremors yet

To see how well the economy is doing in Lithuania locally, one just needs to look around not only in megapolises where new buildings under construction are towering, but also in less urbanized towns, too, where new construction sites are popping up and those completed houses never wait for their buyers long.

«To tell you the truth, the summer has been insane, I mean in terms of sales of new apartments and houses. The supply is hardly catching up with the demand despite the record-high real estate prices. I am in the midst of making several deals where the numbers of purchases are all-time record-highs,» Regina Lingė, co-founder of Palanga NT (RE) brokerage firm, told BNN. «However, talks about a looming crisis is in the air,» she added.

For now, the picture seems spotless across all Lithuanian industries, as a matter of fact.

Germany sours Lithuanian businessmen’s mood

Speaking to BNN, Sigitas Besagirskas, a prominent Lithuanian economist and president of Vilnius Industry and Business Association, emphasised that the manufacturing in Vilnius county remains strong and the pace is not likely to slow down in short-term, Yet he cautions that industrialists are getting increasingly wary – and weary – about the bleak prospects of German economy.

«Alas, it is underperforming for the eighth consecutive month, which is a bad omen. All want now to see if it will rebound in the second half-year,» Besagirskas said. «I’d say it, not the fallout from hard Brexit or the US and China trade wars worries all most,» he added.

With 11.9 per cent of the volume, Germany is second, right after Poland, on Lithuania’s top exporter list and among top- five investors.

«Lithuanian economy is small, yet very much oriented to Germany, so it is very likely that the German slowdown will make a negative impact on the export market,» Besagirskas emphasised.

Lithuania’s Germany-bound export has risen an impressive 30 per cent over the last year and, of the volume, ca 70 per cent accounted for logistics.

«A slower German economy can also negatively affect all foreign direct investments in Lithuania,» he added.

Yet the expert does not send Mayday calls so far. «An incessant inflow of EU funds is still available for Lithuania companies, although the co-financing has become bigger. So the inertia from the couple last years of growth coupled with the availability of the funds will keep economy rolling forward,» Besagirskas concluded.

Other economists do not foresee troubles either

Tadas Povilauskas, economist of SEB Bank Lithuania, says that the economy expansion in the second half of the year and in 2020 will be «significantly» slower due to the deteriorating foreign trade balance. Yet SEB Lithuania upgraded its GDP prognosis for Lithuania from 3.2 per cent to 3.6 per cent due to the faster than planned growth of economy in the first half-year. Notably, SEB did not adjust the GDP growth for Lithuania for 2020, which is at 2.4 per cent now.

Swedbank Lithuania’s chief economist Nerijus Mačiulis also points out that most of Lithuania’s structural indicators do not cause much anxiety about its economic prospects.

«Even though we forecast that the global economic growth in 2020 will be the slowest since 2009 and will be below 3 per cent and that more than one big industrial country will probably find itself in recession, we continue to project Lithuania’s growth at 2 per cent. It will be almost half as slow as this year,» Mačiulis said this week.

He notes that Lithuania’s economy remains balanced and shows no signs of overheating, so external shocks are much easier to absorb.

Long-term outlook looks gloomier

The Lithuanian Confederation of Industrialists (LCI) does not send alarms of distress too, but acknowledges that long-term outlook for the country looks gloomier than a year ago.

According to Gabrielius Makuška, an LCI expert, albeit Lithuanian producers’ overall expectations are still marked with optimism, but there are more signs in the expectations of an approaching slowdown.

«Lithuanian companies are acknowledging it with more concern. For example, the recent Central Bank‘s survey shows that the share of companies forecasting export growth has decreased from 26 per cent to 20 per cent over the last half-year. Such gloomier expectations are particularly spread among small and medium-size companies. There are also fewer businesses that expect growth of demand. The number of the latter dropped from 31 per cent to 25 per cent, also over the last six month,» Makuška underscored to BNN.

Challenges to Lithuanian economy

World economies’ global watchdog, International Monetary Funds, concluded in late June that Lithuania’s economy is stable and the country is better than ever prepared for challenges. Borja Gracia, the head of the IMF mission in Lithuania, said then that Lithuania’s economic state is viewed positively, but accentuated that Lithuania needs to improve the education system for it to meet demographic changes.

Lithuania’s Central Bank has named two substantial risks for financial sector: financial imbalances in the Nordic states that Lithuania’s banks are interconnected with and stronger activity in Lithuania’s credit and real estate (RE) market, which can potentially create the risks of a «bursting bubble» in the run.

Leave a reply

Discussions about MPC nearly ruin Latvian government’s 2020 budget viewing

The sudden outburst of the government over the addition of the mandatory procurement component to the government’s list of topics almost caused discussions of the 2020 government budget fall through.

EU court views Ireland’s appeal against 13 billion-euro fine to Apple

The General Court of the European Union has commenced the hearing of an appeal against a decision by Brussels that Ireland has to recover 13 billion euros from the tech giant Apple for unpaid taxes.

Amid investigations, Swedbank admits shortcomings in anti-money laundering work

In Estonia and Sweden, the leading bank of the Baltics, Swedbank has admitted to investigating authorities that it has had and still has certain shortcomings in areas linked to the prevention of money laundering, according a press release.

Latvian government approves changes to improve healthcare for pregnant women

Latvia’s government has approved amendment to Cabinet of Ministers requirements to help expand screening of birth defects and establish recertification requirements for obstetricians, Healthcare Ministry reports.

FVS: catering in multiple education facilities in Sigulda was being provided illegally

Latvia’s Food and Veterinary Service found different violations of regulations during inspections performed in schools around Sigulda, as confirmed by the service.

Exclusive | Competition Council’s chief on construction cartel; society needs to see the guilty pay the price

Society needs to see the guilty pay the price. Those guilty need to step down from their posts, not go underground and wait until the storm has calmed down, BNN was told by Competition Council’s chairperson Skaidrīte Ābrama about the recently uncovered construction cartel and suspicions over involvement of high-ranking officials.

U.S. urges Lithuania not to honour people linked to Holocaust

An American Special Envoy for Holocaust Issues has called on Lithuania «to objectively review the actions of historical figures to determine the impact of their actions, both positive and negative».

Minsk stands for its nuclear rights as Lithuania warns about Astravyets’ safety

As the Belarus’ first nuclear power plant is scheduled to start operations later in 2019 despite opposition from Lithuania, the Belarusian Deputy Energy Minister has reiterated the country’s rights to produce nuclear power.

University of Latvia to organize a new procurement for House of Letters

The procurement for the House of Letters has been put on hold and the University of Latvia has decided to organize a new procurement for the building’s construction, as acting LU rector Gvido Straube told public broadcaster LNT programme 900 seconds.

Latvia’s SRS’s tax collection in eight months exceeds expectations

In the first eight months of 2019 Latvia’s State Revenue Service has collected EUR 6.446 billion for the state budget, which is 0.3% or EUR 20.899 million more than previously planned, according to published information.

Amnesty International awards teenage climate activist Thunberg

Amnesty International, which describes itself as the world’s largest human rights organisation, has given its Ambassador of Consciousness Award to Swedish schoolgirl, who has inspired the mass weekly demonstrations calling for climate-conscious policy reforms.

Citskovskis: wages in public administration should reach 80% of private sector’s

In the development of a new remuneration system in public administration, one of the goals is achieving that wages in public administration reaches 80% of the remuneration level in the private sector, said the head of Latvia’s State Chancellery Jānis Citskovskis in an interview to Latvijas Radio.

EU to discuss Brexit with UK each day, Johnson still pushing to leave on October 31

A high-level Brexit meeting has been held by the European Commission President Jean-Claude Juncker and the British Prime Minister Boris Johnson, where the officials have agreed to make meetings more frequent with October 31 as the deadline.

Investigation of intestinal infection leads FVS to vegetable processing shop in Jelgava

While investigating the cause behind the intestinal infection in Sigulda, Latvia’s Food and Veterinary Service has shut down a vegetable processing shop in Jelgava, as confirmed by the service.

Ukraine planning surge in military spending as war continues

Amid preparations for Donbas War talks in the Normandy format, Kyiv has announced a draft national budget that would include a 16%-hike in defence spending.

Latvia’s number of vacant job above EU’s average in second quarter of 2019

In Q2 2019, the number of vacant jobs in Latvia was above the average of European Union and Eurozone, which is reflected in percentage ratio between the total number of jobs – both taken and vacant.

Estonia worried West’s loosening grip on Russia could end in third intervention

Amid concessions to Russia in the OSCE and calls to invite it to the G7, Estonian Foreign Minister has spoken against the possibility of lower European Union’s principles against Russia, which could encourage Moscow to carry out third interventionist adventure.

19 children and four kindergarten employees show signs of intestinal infection

By Sunday, 15 September, symptoms of intestinal infection were found for 23 people, including 19 children and four kindergarten employees in Sigulda and its surrounding areas, as reported by Disease Prevention and Control Centre.

Number of vacant jobs in Latvia up 5 900 or 23.8%

In Q2 2019 there were 30.5 thousand job vacancies in Latvia, which is 5.9 thousand vacancies or 23.8 % more than in Q2 2018. In public sector there were 8.6 thousand and in private sector 21.9 thousand vacant jobs.

Europe’s electricity network will help increase energy exchange opportunities

After Baltic States’ joining of the European Electricity Network, there will be an increase for opportunities in energy exchange and trade, says AS Augstsprieguma tīkls board member Varis Boks.

Tartu retail battle: Maxima objects being shoulder to shoulder with Lidl

In the city of Tartu, Lithuanian grocery retail chain Maxima is not satisfied with the local zoning plan that could see the first shop of its low-price competitor Lidl be opened close to its property.

Unemployment benefits in Latvia to be paid for eight, not nine months

From now on unemployment benefits in Latvia will be paid for eight, not nine months. The total amount is cut, thereby allowing Welfare Ministry to save EUR 12 million, said minister Ramona Petraviča in an interview to LTV programme Rīta panorama.

Transport pollution: Paris planning 500 subsidy to e-bike purchase to millions

As France aims to reduce its air pollution, greater Paris is considering a massive subsidy programme to millions of its inhabitants to the purchase of an electric bike.

Polluted areas in Riga disappear from registers; builders often relieved of clean-up

Polluted territories in Riga have a tendency to disappear from registers of such territories. Often this results in builders being relieved of the responsibility of construction restrictions and the duty to clean polluted territories, as reported by public broadcaster TV3 programme Nekā Personīga.

EU: Progress in Brexit talks not «huge» as PM Johnson says it is

«Huge progress» – these words were used by British Prime Minister Boris Johnson to describe the state of Brexit talks before he travels to Brussels hoping to overcome the Irish backstop problem. European Commission however is yet to receive alternative proposals to speak of.

Newest comments