Latviski English По-русски
Monday 17.02.2020 | Name days: Konstance, Donats

Swedbank predicts 2.2% economic growth for Latvia in 2020

(No Ratings Yet)

Swedbank, outlook, economic growth, changes, ECBLatvia’s national economic growth in 2020 will rely on private consumption. Overall growth is expected at 2.2%, according to Swedbank chief economist Liva Zorgenfreija.

The expert predicts economic growth to bloom closer to the second half of 2020 and that a conditional recovery is also expected next year. Nevertheless, negative risks for global and Latvia’s economy remain high this year.

«Latvia’s economic growth concluded the last decade with a not very encouraging growth rate. Although short-term data points to a stabilization of the situation in the world, outlooks suggests that neither the world not Latvia is expected to have a rapid economic breakthrough at the beginning of the new decade,» says the economist.

Consumption to steer domestic demand

Zorgenfreija notes that although economic growth had slowed down last year, this was not apparent on the labour market. Entrepreneurs felt that shortage of demand last year had a strong slowdown effect on business development. Nevertheless, labour force shortage remained high. Both this and the fight against envelope wages had assisted with wage growth, especially in the private sector.

The economist predicts that wage growth will slow down because of weak economic growth. However, it will remain rapid – 6.5%. Unemployment is expected to stay around 6.3%.

Moderate inflation (2.4%) will improve actual purchasing power. Inflation will be steered by excise tax rise and still slowed by reduced prices for certain utilities, the bank predicts.

«Generally the welcoming labour market, high and even growing mood of consumers and moderate inflation point towards sustainable growth in private consumption,» says Zorgenfreija.

Still 2020 is expected to have slower development of investments, according to Swedbank outlooks.

«It is likely that the highest point of European Union structure funds financing is in the past. This is why we should not expect any additional backing for investments. Private investments will influence the mood of businessmen, which, though suffered a dip last year, remain above the average long-term level. Construction sector’s rapid growth rates will also drop through. Large-scale investment projects expected in relation to Rail Baltica will improve investment contribution in the coming years,» explains Zorgenfreija.

Weak global growth will slow development of Latvia’s exports

US-Chinese first stage trade agreement, as well as greater clarity in Brexit process, has helped improve the global trade picture for a short while, Swedbank explains.

At the same time, the bank predicts the economy of partner states will grow slowly in 2020, and GDP growth of Latvia’s closest neighbours – Lithuania and Estonia – will decline rather rapidly. Latvia’s export growth will remain uncharacteristically low in 2020. However, as global economic rate becomes livelier, a more rapid export contribution is expected in the second half of the year, the bank predicts.

Swedbank reminds that for the first time since 2016 at the end of 2019 export-focused processing industries had experienced output decline. The bank predicts that both demand and price decline will continue causing problems for wood-processing industry.

On top of that order decline in metal-working industry suggest to the bank this industry may experience problems in the near future.

Meanwhile, investment growth into food production suggests opportunities to explore the export market in the future.

Nevertheless, Swedbank does not expect any rapid growth rates in the processing industry.

Exports of services are predicted to be sustainable and remain important for business, IT and telecommunication services’ contribution. Decline of transits and Mobility Package’s reduced land carriers’ competitiveness will limit exports of transport services on the European markets. Structural changes in the finance sector do not offer hope for any contribution of this industry’s services for exports, the bank explains.

Swedbank predicts relatively slow growth for the next quarters with some bloom in the second half of the year.

In spite of weak exports, the consistently strong private consumption will maintain growth at 2.2% in 2020. Next year growth of the export market is expected to improve. The same can be said for rapid growth of real purchasing power, thereby ensuring 2.7% economic growth.

Risks at the margins remain notable

In recent months there has been a rise for optimism in the world. However, risks remain serious, Swedbank concludes.

Risks may increase further by the end of 2020, considering presidential elections in USA and the lack of clarity with Brexit transition period. The beginning of the year reminded that geopolitical risks can increase at any moment, says Zorgenfreija.

Even ECB policy is on the eve of changes because president Christine Lagarde has ordered re-assessment of the strategy. Sharp changes with ECB policy would increase the confusion with already nervous finance markets, the economist says.

Read also: Swedbank: Latvian households’ financial situation assessment the highest since 2013

Swedbank predicts structural changes of the finance sector will have a lasting positive effect on Latvia’s image in the eyes of investors.

Leave a reply

Week in Lithuania: retailer Maxima got in trouble, Turkish firm’s assets frozen, New Agency set up

Lithuania's concessions provided to the Polish business group Orlen, operating an oil refinery in Lithuania's Mažeikiai, have helped to improve bilateral relations but were not the key element in their thaw, Lithuanian President Gitanas Nausėda said this week.

BNN summary of the week: Levits urges protecting officials. Riga City Council toppled. Tax changes planned

The BNN gives you a summary of the key events of the past week, told in news stories of the following topics: Serious signals; Perseverance; Dismissal; Tax changes; Media supervisors; Inflation; Slower over the bridge and Belief protectors.

Prime minister orders development of proper government MPC monitoring rules

Latvian Prime Minister Krišjānis Kariņš has ordered Economy Minister Ralfs Nemiro to immediately commence work on a new mandatory procurement component monitoring project and submit it as soon as possible to ensure efficient control over the system, as confirmed by the prime minister’s office.

1 700 medics infected with coronavirus in China; six dead so far

More than 1 700 medics in China are confirmed infected with the new coronavirus. Six of them have already died, as confirmed by healthcare officials.

Number of foreign guests hosted in Latvian places of accommodation up 1.6%

2.85 million foreign and Latvian visitors stayed at Latvian tourist accommodation establishments in 2019, which is 1.6 % more than in 2018. Compared to the previous year, the number of nights spent by visitors increased by 2.6 %, reaching 5.51 million in 2019.

Experts approve Riga Central Station’s Rail Baltica regional train reception solution

A solution has been found to install a four-lane railway section at Riga Central Railway Station to replace the existing two-lane section. This will help secure not only international and airport connectivity for Rail Baltica trains but also further improve intercity and suburban train services, as reported by the project’s representatives.

Beness Aijo asks Vladimir Putin for political asylum; claims Russia has released him

Beness Aijo, who fled Latvia to avoid criminal prosecution for calls of a violent overthrowing of the government, has asked Russian President Vladimir Putin to provide him political asylum. He also claims Russian authorities have released him from custody.

Share prices plummet on stock markets over concerns for coronavirus

On Thursday, 13 February, share prices around the world plummeted as concerns over the Covid-19 coronavirus epidemic in China. London Stock Exchange index declined shortly after British Finance Minister Sajid Javid’s sudden resignation.

Saeima to add considerable amendments to Criminal Procedure Law

On Thursday, 13 February, Latvian Saeima approved amendments to the Criminal Procedure Law that provide the duty to provide truth in testimony if a person uses the right to testify.

Week’s end in Latvia will be snowy, rainy and windy

Strong wind, which may reach a speed of 25 m/sec along the coast, is expected at this week’s end in Latvia. Air temperature, however, will remain mostly unchanged, as reported by Latvian State Environment, Geology and Meteorology Centre.

National Alliance and New Unity may run in Riga City Council elections separately

Following the decision made by the New Conservative Party to run in upcoming Riga City Council snap elections separately, a similar decision will likely be made by the National Alliance «All for Latvia – For Fatherland and Freedom/LNNK» and New Unity.

Airbnb and Vilnius sign «historic» agreement, taxmen to zero in on short-term rentals

Long chastised for little regulation, Airbnb, a popular short-term rentals platform, was praised this week in Lithuania after capital city Vilnius and Airbnb inked an agreement, envisioning that from February 1 onwards Airbnb will automatically collect Vilnius city tourism tax due per night and per person and transfer the sum directly to the City of Vilnius on behalf of hosts.

Latvian parliament dissolves Riga City Council

The Saeima has decided to dissolve Riga City Council. The city council remains active, however, because the law on its dismissal will come to force the next day after its promulgation. Now President Egils Levits has ten days to make his decision on the promulgation.

Tallinn residents reject proposal to limit driving speed to 40 km/h

Residents of Tallinn have rejected mayor Mihhail Kõlvart’s proposal to limit driving speed within city limits to 40 km/h, forcing the municipality to look for other ways to control road traffic speed, as reported by Estonian public media ERR.

Journalists Kalderauska and Eglītis approved as members of National Electronic Mass Media Council

On Thursday, 13 February, Latvia’s Saeima approved journalists Ieva Kalderauska and Jānis Eglītis as new members of the National Electronic Mass Media Council.

European Parliament urges putting an end to illegal pet trade

To protect animal welfare, pet owners and public health, the European Parliament urges the European Union to come up with an action plan to put an end to illegal pet trade, BNN was informed by EP press-secretary in Latvia Jānis Krastiņš.

Kariņš: Baltic and Nordic region should become Europe’s leader

«Baltic and Nordic countries region will be a leader in Europe when it comes to climate policy, innovations and hybrid-security matters. It is in our interest to enhance this commitment by implementing a reasonable and ambitious policy in these sectors,» said Latvian Prime Minister Krišjānis Kariņš during his meeting with Finnish Prime Minister Sanna Marin.

Animal rights activists show footage of cruel treatment of animals at Lithuanian fur farm

Animal rights activists have made a video recording depicting unacceptable conditions in which minks are kept in some fur mark in Lithuania, as reported by Lithuanian public media LRT with reference to Daily Mail.

Latvian government proposes increasing state family benefits

In the context of expected tax changes it is proposed to increase the family state benefit for children, estimating that this may cost an additional amount from EUR 81 to EUR 97 million a year, according to information available to LETA in regards to the offer for tax policy guidelines for 2021 to 2025.

Lawyers: Olainfarm talks should be analysed by law enforcement institutions

Analysis of recorded Olainfarm talks should be entrusted to law enforcement institutions, and all lawyers should distance themselves from people like Mārtiņš Krieķis. «This would be fair,» said board member of United Multidisciplinary Trade Union, lawyer Alvis Pīlāgs and chairman of Latvian Lawyers Association Rihards Bunka about Krieķis as «person without ethics» in an interview to BNN.

Latvia to request Russia to hand over detained National-Bolshevik Beness Aijo

Latvian office of the prosecutor will ask Russia to hand over the recently detained National Bolshevik Beness Aijo, who had fled Latvia several years ago to join Moscow-supported militants in Eastern Ukraine.

Non-taxable minimum and PIT rates proposed to be changed in context of tax changes

In the context of upcoming tax changes in Latvia it is proposed to change the differentiated non-taxable minimum and PIT, as stated in tax policy guideline changes for 2021 to 2025 available to LETA.

Fox News misinterprets facts by calling Lithuanian cities «the deadliest», LRT says

Although Lithuania stands out among other EU member states with its negative statistics with murders, it is wrong to call Lithuanian cities «the deadliest», as reported by Lithuanian public media fact-checking project LRT Facts, which has called the news reported by American media a «Manipulative/sensationalist headline».

SPRK: level of dissatisfaction with electronic communication services up in Latvia

Compared to 2018, the level of dissatisfaction with service contracts among Latvian consumers had increased 20% last year, whereas complaints over the quality of services had increased 9%, according to information compiled by the Public Utilities Commission on complaints received about electronic communication services.

Saeima opposition will not put obstacles for snap elections in Riga

The opposition of Latvia’s Saeima will not turn to President Egils Levits in relation to the legislative draft detailing dismissal of Riga City Council. This means members of the opposition will not put obstacles in the way for snap elections in Riga City Council.

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