Latviski English По-русски
Monday 24.02.2020 | Name days: Diāna, Dina, Dins

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

Authorities concerned about Rimi and Maxima bread return practices

Following multiple uncovered problems with bread supply practices in retain trade, Latvia’s Competition Council has asked the largest market participants LLC Rimi Latvija and LLC Maxima Latvija to improve internal control processes, as reported by CC communication specialist Zane Gorškova.

EC not planning EU border closure over coronavirus outbreak in Italy

In the Schengen area and EU member state Italy, the dangerous coronavirus has been diagnosed to over 200 people, yet the closure of national boarders is not planned in Brussels, DW reports.

Employment among Latvian population reportedly at 65% in 2019

A total of 910 thousand people or 65 % of the population of Latvia aged 15–74 were employed in 2019. Compared to 2018, employment rate grew by 0.5 percentage points and number of employed persons by 0.6 thousand.

On 102th Independence Day, Estonians urged not to take freedom as granted

Estonia has turned 102. An independed state of Estonia was declared on February 24, 1918. «Freedom and independence are not to be taken for granted,» said Henn Põlluaas, the Estonian parliamentary speaker in an address, ERR reports.

Latvia’s unemployment level reportedly at 6.3% in 2019

61.3 thousand people aged 15–74 were unemployed in 2019. Compared to 2018, number of unemployed persons dropped by 11.5 thousand or 15.8 %.

Danish court officially decides to extradite Kristīne Misāne to Latvia

The Danish court has officially decided to have Latvian citizen Kristīne Misāne extradited to her home country, as confirmed by Misāne’s lawyer in Denmark Henrik Stagetorn.

Secret minutes reveal how Latvia prepared for Moneyval exam

Ministers of Latvian government, Financial Intelligence Service and the management of Finance Capital and Market Commission had likely gathered for a Finance Sector’s Development Council meeting prior to a plenary meeting of Moneyval, which was the first of the test towards Latvia avoiding getting greylisted for insufficient prevention of money laundering, as can be concluded from the restricted access document the details of which are revealed by LTV programme De Facto.

Lithuania’s Klaipėda spends 461 000 and learns it shouldn’t introduce trams

The Lithuanian port city of Klaipėda has spent a lot on a feasibility study into the development of public transport. The 461 000-euro study found that tram or a subway transit network would not be a substantiated choice of Lithuania’s third largest city, LRT reports.

Canary Islands hit by sand storm from Sahara; stops aviation

The Spanish Canary Islands have been hit by a sand storm from the Sahara Desert. Flights were cancelled and later resumed for the most part, BBC reports.

Latvia’s president promulgates Law on Dissolution of Riga City Council

On Monday, 24 February, Latvia’s President Egils Levits promulgated Saeima’s approved Law on Dissolution of Riga City Council.

S&P Global Rating upgrades Latvia’s credit rating to historically highest level

International credit rating agency S&P Global Rating has upgraded Latvia’s credit rating from A to A+ with stable future outlook, as mentioned in the agency’s published announcement.

Merkel’s Christian Democrats get bitter result in Hamburg election

German Chancellor Angela Merkel’s Christian Democratic Union has received the poorest result in the federal state elections of Hamburg, according to British broadcaster BBC.

Reins over New Conservative Party once again handed over to Jānis Bordāns

Latvia’s Justice Minister Jānis Bordāns will be in charge of the New Conservative Party.

Italy hit by lethal coronavirus cases puts 11 towns on lockdown

In Italy, where three people infected with the coronavirus have died, a lockdown has been imposed on 11 towns to limit the spread of the dangerous virus infection, The Guardian reports.

Cold snap expected in Latvia in night hours this week

This week daytime air temperature in Latvia will not exceed +5° C. At night, however, air temperature will drop below 0° C, as reported by Latvian State Environment, Geology and Meteorology Centre.

Week in Lithuania: President proposes legislative initiatives, Tesla on lookout, Klaipėda Port faces fine

In Lithuania, the top news stories of the past week were President Gitanas Nausėda proposing nine legislative initiatives, US electric car maker Tesla considering a network of charging stations and Klaipėda Port facing a fine for allegedly discharging wastewater containing mercury.

BNN summary of the week: zoo without Līdaka. Misāne back in Latvia. Grey list avoided

The week continued with uncertainty over the situation with Latvian citizen Kristīne Misāne in Denmark. While the people were mobilizing and gathering signatures at website, Latvia’s Office of the Prosecutor General issued a European arrest order to have Misāne extradited to Latvia.

Financial Action Task Force decides to not add Latvia to its «grey list»

The world’s central anti-money laundering organization Financial Action Task Force has decided to not exercise increased monitoring of Latvia. This means the country will not be added to the organization’s «grey list», as LETA was informed by Latvian Prime Minister Krišjānis Kariņš’s office.

Latvian minister outlines Germany as an important strategic partner

Germany is a strategically important economic partner for Latvia, said Latvian Foreign Affairs Minister Edgars Rinkēvičs during his meeting with Germany’s Federal Minister for Economic Affairs Peter Altmaier on Friday, 21 February.

Access to illegal TV content denied to 11 000 Latvian households last year

In 2019 access to illegal TV content in Latvia was denied to 11 000 households. A dozen criminal processes have been commenced over illegal supply of audiovisual content, as reported by State Police.

Producer price level in Latvia’s industry down 1.3%

Compared to December 2019, the level of producer prices in Latvian industry didn't change in January 2020. Prices of products sold on the domestic market reduced by 0.7 %, but prices of exported products – increased by 0.7 %.

In China, coronavirus hits prisons as 500 prisoners and guards infected

In China, the outbreak of the dangerous coronavirus continues, over 500 cases of infections have been registered in prisons. Meanwhile, death toll from health problems related to the virus has reached 2 236, according to The Guardian.

Saudi Arabia provides Latvian companies stable tax regime

Latvia and Saudi Arabia have plans to provide businesses with stable tax regimes for companies working in each respective country without coverage from the other country’s regulations, as reported by Saeima’s press-service.

Estonia accuses Russia over large cyberattack against Georgia

Estonian Foreign Minister Urmas Reinsalu has stated that Estonia, just as Georgia and a number of Western countries, sees a Russian intelligence service as having perpetrated a large cyberattack on Georgia in autumn 2019, according to a statement on the web site of the Estonian Foreign Ministry.

Latvian Healthcare Ministry puts third stage of e-health project on hold

Healthcare Ministry plans to focus on existing e-health services and will not develop their next stage, said minister llze Viņķele at a press-briefing on Friday, 21 February.

Newest comments

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