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Monday 18.11.2019 | Name days: Doloresa, Aleksandrs

Minimal growth expects Latvian timber industry

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

This year will bring only minimal growth to Latvian timber industry, due to full load of production capacity and limited local resources. In order to boost turnover, producers should switch to goods with higher value added, economists are convinced.

Swedbank senior economist Lija Strašuna:

Industrial output growth pace slowed in November (from 20% to 11%), but for the most part it was determined by the rapid output climb in November 2009 (the so called base effect), not the slight drop in it in November 2010. It is expected 2010 December industrial output growth pace will accelerate, despite possible slight month’s drop. Manufacturing industry reports similar tendencies, forming about 80% of the total industry.

As expected, wood industry growth tempo kept slowing down. Wood products (excluding furniture) production dropped by 2.3% in November, compared to the previous month; moreover the annual growth fell from 20.7% in October to 8.7% in November, due to the base effect as well. The average 2009 monthly wood industry growth formed 3% (the seasonally adjusted), while in eleven months of 2010 it hit 1% already. It is expected 2011 will not bring any considerable growth to the timber industry of Latvia, due to full load of production capacity and limited local resources. To promote turnover, producers have to switch to goods with higher value added.

2010 industrial growth might reach 13-14% on average, while it might drop by half in 2011.

SEB Bank economist Dainis Gašpuitis:

The industry reports 11.4% annual growth in November, including an 12.4% increase in manufacturing output. Manufacturing shows considerable growth, yet the pace is slowing down at the moment. Growth pace rate was the lowest in six months time in November. Most of manufacturing sectors still report double-digit growth, while single-digit growth is evident in furniture, wood and food production. Chemical industry is the only one reporting a fall.

Speeding growth rates will keep decelerate, due to gradually disappearing base effect impact, however the industry will show growth also in 2011. In addition the industry will benefit from constructive collaboration with Russia and the CIS countries. Similarly, the most active and long-term thinking producers will benefit from export to more rapidly developing countries. Gradual stabilization will boost local market orders as well. Investment and financing attraction environment will improve, promoting friendly conditions for industry development, especially, those promoting production of new products and services with high value added. Inflation, wage rise and lack of qualified work force driven challenges will become more urgent.

DnB Nord Bank economy expert Pēteris Strautiņš:

According to seasonally adjusted data, industrial output dropped by 0.3% in November, compared to October, with the export-oriented manufacturing sector forming the majority of it – 0.6%. This is the fourth consecutive month manufacturing output lingers around a single point, which could be called a stagnation, given the rapid growth rate of the first half of the year. November reports considerable growth drop, given the annual indicators, due to the rapid growth pace in the corresponding period in 2009. It is expected December’s seasonally adjusted data will show speeding, because the traditionally silent period reported uncharacteristic activity. Energy sector’s indicators are expected to be positive as well, due to the cold weather.

In eleven months of 2010, industry surged 13.8%, compared to the exact period in 2009, while it is expected to register 15% growth by the end of the year. 2011 growth will be slightly smaller, however, still exceeding 10%. Base effect will still ensure growth on annual basis, while investment in equipment and products development will play the major role later in the year. Wood processing will show more moderate growth next year, while metal processing and mechanical engineering growth rate will remain flat, more than 20%.

Boosting output options have been doubted a lot, as spare capacity reserves have dropped considerably. This is a serous issue indeed, yet the producers are not idle. With the growing demand, it turns out a company’s nominal capacity is pretty relative, as businessmen manage to exceed it by organizing work better and making use of the flexible Latvian labour market. Investments have become more frequent in the industry as well.

Industrial growth halt does not endanger us in 2011, unless global financial markets overheat. Maintaining double-digits growth in manufacturing industry for the following five years is an ambitious, yet tangible aim. Without it, Latvia will find it difficult to compete with other EU countries offering jobs to people from Latvia.

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  1. rut says:

    In eleven months of 2010, industry surged 13.8%, compared to the exact period in 2009, while it is expected to register 15% growth by the end of the year. 2011 growth will be slightly smaller, however, still exceeding 10% – quite sharp differences are forecast..

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