bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Ceturtdiena 20.09.2018 | Name days: Marianna, Ginters, Guntra

Income equality in Latvia comes close to Europe’s average level

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe year began with tremors for financial markets all over the world. Nevertheless, the world’s economy is not looking all that bad in spite of overall negativity surrounding future developments, as concluded in Swedbank’s latest economic outlook.

Latvia’s economic growth is not expected to exceed 3% in 2016-2017. Although growth rate is solid and close to its potential, policy-makers are concerned about it nonetheless. The gradual income equalization process with Europe’s average level has become slower over the past couple of years. The labour market continues to heat up, and this will further enhance consumption, which may lead to economic growth rate reaching or even exceeding 4%. Benefits of this will be purely short-term, however, because excessively fast growth of wages and consumption can potentially create problems that will most likely slow down growth and make the road towards European level of income even longer, notes Swedbank’s lead economist in Latvia Martins Kazaks and senior economist Lija Strasuna.

Negative risks left from the previous years have only increased since the beginning of the year. Economies of the world were weaker than expected last year. It seems the beginning of the year will be largely the same. Although Swedbank economists slightly tune down GDP expectations, the world is nonetheless expected to grow faster in the next couple of years than it did last year. Cheap oil will enhance consumption in developed countries. Eurozone’s situation no longer seems so dire – unemployment is in decline, crediting requirements continue to improve, the policy of the European Central Bank continues being very supportive. The situation in developing countries, on the other hand, is not as promising – currencies are losing their value, debts continue piling and the financial state of many countries is worsening. Considering the recent drop of Russian rouble and oil price, inflation rise and budget cuts, the recession in Russia will be longer and deeper than previously predicted. Weak growth could potentially recover at the end of 2016 or the beginning of 2017. China is trying to control the slowdown and it seems to be working for the moment. Even so, the country’s economic growth is becoming gradually slower. On top of that, fluctuations on financial markets will likely continue in the future.

Oil prices are currently in a vulnerable state, having dropped as low as USD 30 at times. The cause of the drop lies in overproduction. Demand for oil is on a rise, yes, but supply is currently much higher than demand. Because of fluctuating oil production costs are for the most art below the market cost, supply refuses to decline. Shale oil production in USA has declined very little and the previously expected drop is currently nowhere to be seen. Fighting over market shares, OPEC countries are refusing to reduce oil production volumes. Iran will soon re-enter the market with more oil to offer. Oil prices are expected to remain very low – even though new investments in oil industry have already declined, a certain amount of time is needed before changes can appear. USA’s shale oil production can adapt to changing prices very quickly, as opposed to traditional oil production. Development of alternate energy sources can help reduce oil price rise in the future, economists say.

Low oil prices also mean cheaper energy resources for Latvia. Consumer price is expected to remain below 1% this year. This mainly applies to services and is because of administrative measures (application of VAT for management services, larger excise tax for oil products and alcohol). Inflation is only expected to come close to 2% in 2017.

Trade ties with Russia are gradually becoming weaker. Russia’s presence in Latvia’s exports has declined below 8%, which is the lowest level since 2005. This situation will remain because the purchasing power of Russian residents will continue to decline. Weaker trade ties also mean less influence coming from economic shocks in Russia. In relation to Russia, the main risks are not economic but rather geopolitical. After losing exit to Russian and CIS markets, exporters instead turned their sights on Europe and other markets. Stronger growth in Europe also means Latvia’s export growth will be even stronger in 2016-2017.

Latvia’s GDP may grow 3.3% this year and 3% next year. With increased activity on the labour market, there is a possibility that growth may exceed 4%. Although the state budget deficit has a tendency of slightly exceeding the allowed level, the overall financial state of the country is stable. The main negative risks for Latvia’s economy lie outside its borders, which is something that cannot be affected directly. Economists are concerned that this mostly beneficial short-term situation can only bring temporary relief. Without taking action, productivity will remain low and problems from heated up labour market may turn out worse than anticipated. Without sustainable growth, it will take much longer to equalize Latvia’s income level with that of the average one among European member states. In order to speed up growth rates, it is necessary to uphold promises: reduce shadow economy, improve the education and justice systems, economists add.

Ref: 102.109.109.5378


Leave a reply

Latvian parliament conceptual supports pension bonus indexation

On Thursday, 20 September, Saeima supported in the first reading several initiatives for a more rapid pension climb for several groups of pensioners, as reported by Saeima press-service.

Majority Saeima deputies support open president vote; UGF members fail to decide unanimously

On Thursday, 20 September, amendments to the Constitution regarding open election of the state president were approved in the second reading.

Four Estonian parties have strong support, enough to enter Riigikogu

Four Estonian parties are believed to currently have enough support to enter the Estonian parliament, a broad opinion poll showed, as leading parties compete for voter backing.

Vitol Group concerned over state of rule of law in Latvia; turns to state officials

One of the largest energy resource traders in the world – Vitol Group – has sent a letter to Latvia’s highest ranking officials, expressing deep concern over the rule of law and application of legislative acts in the litigation between LatRosTrans and Polocktransneft Druzba over the EUR 66 million worth technological oil.

As Pope heads to Baltics, more attention to Catholic sex abuse

The time, when Roman Catholic Pope Francis is set to visit the Baltics, greatly differs from the visit by Saint John Paul II in 1993. There is public resentment over the countries spending several million euros to host the trip of the pontiff and the Catholic sex abuse scandals are topic of discussion.

Officials asked to take responsibility for misuse of state resources

If misuse of state resources takes place, officials have to take responsibility and pay for the damages caused to the state, says Public Expenditure and Audit Committee chairman Andris Bērziņš.

May asks EU not to divide Britain, while Brussels waits for UK change of position

At a European Union summit in Austria, UK's Prime Minister Theresa May called on EU leaders leave behind "unacceptable" Brexit demands that according to her may rip Britain apart.

Saeima decides to divide EUR 8.3 million of healthcare budget funds to finance reforms

Saeima’s Budget and Finance Committee has supported the initiative to divide EUR 8.277 million from the planned chronic patient care funding to further finance reforms in the country’s healthcare system.

20 complaints received in first 10 days of data protection regulation

In the first 100 days since adoption of European General Data Protection Regulation, Latvia’s Data State Inspectorate has received 20 data protection violation reports, said the centre’s director Daiga Avdejanova during a meeting of Saeima’s European Affairs Committee.

Ministry: non-banking lenders should assess clients’ solvency more carefully

Although certain improvements have been noticed in the industry, Latvia’s Economy Ministry invites amendments to make non-banking lenders perform more careful evaluation of clients’ solvency and allow creditors exchange information with one another.

Saeima argues over request to assess attempts to cancel «morality amendments»

During a meeting of Saeima’s Inquiry Committee, certain members and NGO representatives exchanged harsh words on Saeima opposition deputies’ request to Prime Minister Māris Kučinskis on association Papardes zieds’ protection of interests for the cancellation of so-called morality amendments.

EU residents believe European authorities should be more involved in certain areas

According to results of European Parliament’s Eurobarometer study, published eight weeks prior to elections in EU, residents believe European authorities should be more involved in certain matters. Priorities include terrorism threats, unemployment and environmental protection.

Estonian internet user growth strongest among elderly

The share of internet users in Estonia has continued to grow in 2018 and has over the past three months increased the most among 65–74-year-olds, official statistics show.

Regulator invited to assess calculation of electricity transmission tariff

Conclusions made by State Audit in relation to tariffs employed by Sadales tīkls show that recommendations received from OECD a couple of years ago in relation to public service tariff calculation should be carefully considered and adopted to ensure balance the interests of consumers and service providers.

Latvian police points towards stagnation in road traffic safety

So far this year 91 people have died in road traffic accidents in Latvia. According to State Police Road Traffic Safety Office Chief Normunds Krapsis, stagnation is present for road traffic safety.

Latvian government to attract EUR 29.5 million to restore Latgale’s degraded territories

On Tuesday, 18 September, Latvia’s Cabinet of Ministers supported the action plan for Latgale region’s economic growth 2018-2021, which provides for attracting of EUR 29.5 million to help restore the region’s degraded territories.

China announces retaliatory tariffs on U.S. goods, seeks free trade support

Beijing has stated it would impose a duty tariff increase on American imports worth 60 billion U.S. dollars in a reaction to Washington's announcement to add tariffs on imports from China worth 200 billion U.S. dollars.

Montenegro to join NATO battalion stationed in Latvia

According to NATO Deputy Supreme Allied Commander in Europe James Everard, Montenegro plans to join the multi-national battalion currently stationed in Latvia.

U.S. looking seriously at Poland's request for American base on its soil

U.S President Donald Trump has noted the country was looking seriously at a request from Poland for a permanent U.S. military base in the fellow NATO member state and agreed that Polish concerns about possible Russian aggression were shared.

Russian plane near Syria shot down by ally targeting Israeli planes

The Russian military plane, which went missing on Monday, has been shot down by its ally Syria targeting Israel's war planes and the number of servicemen lost in the event has been corrected from 14 to 15, the Russian government stated.

Latvian border guards find more than 140 kg of hashish in a car

On 16 September, Latvian State Border Guard detained a 1991-born man and his car at Grebnev border checkpoint. A secret compartment containing 145.3 kg of narcotic substances was found in his car during a routine inspection, as reported by State Border Guard.

EU suspects German car-makers of colluding against cleaner technology

EU competition watchdogs are probing if German automotive giants have colluded to restrict the development of clean emission technology.

Number of job vacancies in Latvia up 7.8 thousand in Q2 2018

In Q2 2018 there were 24.5 thousand job vacancies in Latvia, which is 7.8 thousand vacancies or 46.6 % more than in Q2 2017. In public sector there were 7.2 thousand and in private sector 17.3 thousand job vacancies.

Latvian government desperate to resolve the growing piles of used tires problem

Latvian government has supported Environment Protection and Regional Development Ministry’s prepared report ‘On maintenance of used tires’. This report includes proposals for measures to help resolve the matter regarding speeding up recycling and regeneration rates, as well as the no less important matter of maintenance of used tires.

Cargo volumes handled by Latvian ports remain stable in first half-year of 2018

Latvian ports transshipped 43.468 million tonnes of cargoes in the first eight months of 2018, which is 0.9% more than in the same period of last year. According to data from Transport Ministry, cargo turnover’s negative balance continues declining at Ventspils port, where 13.274 million tonnes of cargoes were transshipped in the first eight months, which is a drop of 11.9%.