Latviski English По-русски
Saturday 29.02.2020 | Name days:

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

Gints Miķelsons put in charge of Latvian Construction Contractors Partnership

From 1 March 2020 onward Gints Miķelsons, who has been the head of Latvian Sustainable Construction Council will be in charge of the Latvian Construction Contractors Partnership, as confirmed by construction contractors.

While Latvia’s GDP grows 2.2%, other Baltic States experience more rapid growth

In 2019, Latvia experienced the slowest GDP growth among Baltic States, according to data from Latvia’s Central Statistical Bureau of Latvia.

Latvia’s GDP growth reportedly 2.2% in 2019

Compared to 2018, the economic growth continued and Gross Domestic Product increased by 2.2 %. In 2019, GDP at current prices amounted to EUR 30.5 billion. Compared to Q3, in Q4 2019 GDP at constant prices grew by 0.1 %, according to seasonally and calendar adjusted data.

Retail trade turnover in Latvia up 2.6% in January

Compared to January 2019, total retail trade turnover rose by 2.6 % in January 2020. Turnover of retail trade in food products grew by 4.4 %.

Vilnis Ķirsis to remain in charge of Unity’s faction in Riga

On Thursday, 27 February, Vilnis Ķirsis was once again picked as the head of Unity party’s faction in Riga, as confirmed by the party.

Latvia and USA sign joint declaration to enhance 5G network security

On Thursday, 27 February, Latvia’s Foreign Affairs Minister Edgars Rinkēvičs and US Secretary of State Mike Pompeo sign a joint US-Latvian declaration on 5G network security, as reported by Foreign Affairs Ministry.

Estonian Tallink Grupp sees profit growth of EUR 9.7 million on year

Estonian provider of ferry transport and related services Tallink Grupp has worked in 2019 with a net profit of 49.7 million euros, according to its unaudited financial results of the year, as reported by Estonian public broadcaster ERR.

Jakrins reportedly a beneficiary in a company that organizes Brasas and Deglava bridge repairs

Long-standing Riga City Council official Emīls Jakrins, who was in charge of the Transport Department not long ago, is beneficiary and factual owner of LLC TecPro Construction, which is a contractor to Lithuanian company Kauno tiltai, which has been hired by the city council to repair Brasas and Deglavas bridges, as reported by Diena newspaper, referencing unofficial information.

UK ready to switch to WTO trade rules if no EU by end of year

The British government has declared that unless concessions are made by Brussels in EU-UK talks on their future cooperation, the former EU member would trade with the bloc on WTO rules from 2021, British news portal The Guardian reports.

Residents able to submit compulsory income declarations by 1 June; VID urges using EDS

March 2020 will mark the beginning of the three-month period within which all residents for whom it is compulsory will be able to submit their income declaration for 2019. This period will last three years for residents for whom this process is voluntary, as reminded by the State Revenue Service.

Lithuanian border guards start informing travellers about the situation with Covid-19

As the new coronavirus Covid-19 continues spreading in Europe, Lithuanian border guards have begun informing travellers from Latvia and Poland about necessary protective measures.

Turkish soldiers killed in Syria, in regime airstrike, Ankara says

In the current epicentre of the Syrian civil war, 33 soldiers of the NATO member state Turkey have been killed as Syrian government military aviation carried out attacks on Turkish military posts set up in its neighbouring country, German broadcaster DW reports citing Ankara.

Weather in Latvia to be winter-like at week’s end

Weather in Latvia is expected to be winter-like at the end of the week – air temperature is expected to drop below 0° C at night in most of the country. In some areas cold snap may be felt during the day, as reported by Latvian Environment, Geology and Meteorology Centre.

First coronavirus infection case found in Lithuania

The first coronavirus infection case is confirmed in Lithuania, as mentioned in Lithuanian government’s statement released on Friday, 28 February, as reported by

SPKC urges passengers of 26 February Istanbul-Riga flight to respond

Latvia’s Disease Control and Prevention Centre is looking for passengers who flew together with confirmed coronavirus patient from Istanbul to Riga on Wednesday, 26 February.

Regional hospitals in Latvia report high demand for protective clothing

Because of the outbreak of the new coronavirus Covid-19, demand has considerably increased for individual protective clothing, which forces prices to go up, as reported by heads of hospitals.

Rail Baltica not just marvelled, but cussed too in Lithuania

If implemented, the ambitious 5.8-billion euro Rail Baltica project aiming to build a nearly 1000-kilometer rail link from Helsinki to Poland through Lithuania, Latvia and Estonia will be a major infrastructural achievement of the Baltics, but the possibility of dashing at the now surreal speed of 250 kilometres per hour as soon as in 2026, when the project is slated for completion, comes at expense of many land owners in Lithuania’s six municipalities, which will be crossed by the European-gauge tracks.

Construction costs in Latvia up 2.8% in January

Compared to December 2019, the level of construction costs in Latvia fell by 0.2 % in January 2020. Labour remuneration of workers reduced by 0.9 %, prices of building materials – by 0.1 %, but maintenance and operational costs of machinery and equipment – rose by 0.2 %.

In Greece, violent protests against new migrant camps continue for 3rd day

In Greece, continued protests and clashes have resulted in over 60 people suffering injuries as people on the islands of Lesbos and Chios protest against the construction of new migrant centres, British public broadcaster BBC reports.

Minister says Latvia’s initiated territorial reform will create more sustainable municipalities

The report from the European Commission mentions that Latvian government’s initiated administrative territorial reform will create more sustainable municipalities with greater capacity and ability to provide services of comparable quality, as reported by Environment Protection and Regional Development Ministry.

Latvian Saeima changes the prosecutor general’s selection order

On Thursday, 27 February, Latvia’s Saeima approved amendments to the order under which the country’s prosecutor general is selected.

Textile producer in Lithuania complies with Greenpeace standards in industrial textile making

Lithuanian textiles producer Utenos Trikotažas has been deemed by environmental protection organisation Greenpeace as complying with the standards of the later as to not using hazardous chemicals and being fair and transparent in its business, LRT reports.

From March onward prices of alcoholic beverages to increase in Latvia

Through a measured and gradual increase of excise tax rate policy, starting with 1 March 2020 the excise tax rate for alcoholic beverages in Latvia will increase, as confirmed by the State Revenue Service.

435 whistle-blower reports received in eight months in Latvia

In the first year of the Whistleblowing Law, Latvian central state institutions have received 435 reports from whistle-blowers, as reported by the State Chancellery.

Estonia finds first positive coronavirus case

In Estonia, the first case of a person being infected with the novel coronavirus has been found, stated Estonian Social Affairs Minister Tanel Kiik on Thursday, February 27, as cited by Estonian public broadcaster ERR.

Newest comments

Do NOT follow this link or you will be banned from the site!