Latviski English По-русски
Saturday 21.07.2018 | Name days: Meldra, Meldris, Melisa

Swedbank: five hottest economic trends this in 2017 and 2018

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis year for the world and Latvia’s economy has been a year of unexpectedly rapid growth with positive influence on state budget, as well as wallets of businesses and residents alike. Latvia’s growth rate in Q3 2017 (5.8%) was more rapid than expected. Although growth will become slower with time, Latvia will experience a rather rapid economic growth next year. Chief economist of Swedbank Latvia Mārtiņš Kazāks mentions five of the most topical economic trends in 2017 and 2018.

2017 for Latvia’s economy

Foundations are set for a tax reform

2017 passed in Latvia under a sign of massive tax reforms. Changes have helped reduce the tax burden, especially for recipients of low income. In addition, all income will be applied with a single basic tax rate, Kazāks said.

«Changes to corporate income tax have to parts: cancellation of advance payments and no more application of corporate income tax on undivided profits. The first will assist businesses during times of crisis and the second will hopefully motivate people to legalize their actual financial flow. In general, the tax reform promises to go in the right direction. Risks, however, are associated with proper application and the amount of bureaucracy involved. The government should learn to speak more clearly – one of the biggest problems is controversial and ambiguous communication,» the economist said.

Finally, we invest

After years of idling, investments have finally begun to grow. Rates already exceed 20%. This is the most rapidly developing sector in Latvia’s economy this year. After a deep crisis in the construction sector, growth is observed there again. This is one of the factors that will warm up the labour market even more, says Kazāks.

A warmer labour market

One of the most topical objects of discussions in 2017 has been the heated labour market, the economist admits. «The market is heated by growing demand for workers, negative demographic trends and lack of required skills. It is estimated that wage rise will have reached 7.5% growth this year. It is important to keep in mind that a significant portion of wage rise came from legalization effect.»

Inflation returns

Inflation returned alongside positive economic growth rates and wage rise in 2017, growing from 0% to 3%. Price rise was affected by higher excise tax, private income tax and more expensive energy resources. Prices increased for food, non-alcoholic beverages, goods and services associated with housing and transports. Although average income increase has been more rapid than price rise this year, residents’ purchasing power has grown and the influence of inflation has been experienced the most by residents with low income.

Crediting rates remain slow

We have yet to notice any noteworthy improvements for crediting volumes in 2017. The reason for this is residents’ cautious approach towards lending services and demand among businesses, although there are a number of new regulations that affect banks and their crediting freedom, the economist notes.

What will 2018 bring Latvia’s economy?

Growth will continue in global economy

«The global economy, though slowly, will continue growing. Latvia will experience this growth as well. Demand in the global economy will help increase export volumes. The main negative risks in the world will be associated with political and geopolitical aspects: specifically the increasing tension between USA and North Korea, Russia’s unpredictable policy, elections in Italy, Donald Trump’s controversial political rhetoric and Brexit,» predicts chief economist of Swedbank Latvia.

Labour market continues getting hotter

Kazāks says that matters that affect the labour market will remain topical next year. The market will continue getting hotter and wages will continue growing. «This applies not only to people employed in the private sector but also people employed the public sector, including healthcare. However, the problem of labour force deficit will become more serious. Wage growth will be close to 10% next year. Legalization will play a major role in this. But it will not translate into a tangible income growth.»

Pre-election murmur

With Saeima election coming closer and closer, it is unlikely politicians will have the courage to announce something brave and new. This means Latvia’s economy will grow next year, but without unpopular and needed reform surprises. And this means politicians are not likely to come back to reforms sooner than 2020. Until then, economic growth will be moderate and the desire to realize reforms and fix problems will be low, the bank’s economist predicts.

Inflation more rapid than this year

Kazāks predicts that inflation will grow from 3% this year to 3.5% next year. «It will be pulled up by excise tax rise, labour market’s heat and wage rise, as well as price rise in the world.»

Latvia’s economic breakthrough – slower, but continued

«Latvia will have sustainable economic growth next year. Exports of goods and services will remain the engine behind economic growth and it will be fuelled by powerful external demand. Investment activity will remain strong. Bigger or smaller benefits will be experienced by nearly all residents, as well as state and municipal budgets. Compared with seasons – although it will no longer be the spring breeze or July heat, we will still get a pleasant warmth in the second half of summer,» said Swedbank Latvia chief economist.


Leave a reply

SRS: cash register reform still stagnates, but has become much faster than it was last year

The cash registers reform continues stagnating. However, it has become much faster than it was a year ago, as reported by State Revenue Service.

Specialists to search for solutions to topical environmental problems in Ventspils

On Friday, 20 July, a meeting was held between Ventspils Commercial Port representatives and specialists from State Environment Service.

Children with functional disorders to receive services financed by EU funds

Child invalids will have access to social services intended to improve their social skills and mobility. More than EUR 4.2 million has been allocated for this goal from the European Social Fund, as confirmed by Latvia’s Central Financing and Contracting Agency.

Producer price level in industry up 4.3% in Latvia

Compared to June 2017, the average level of producer prices in Latvian industry increased by 4.3 % in June 2018. Prices of products sold on the domestic market rose by 4.8 % and those of exported products by 3.7 %.

Total tax debts in Latvia in July – 1.212 billion euros

At the beginning of July total tax debts in Latvia, including outstanding debts, halted debts and debts applied with repayment term extensions, accounted for EUR 1.212 billion, which is 0.8% less than a month prior, according to data from the State Revenue Service.

Survey: every third Latvian resident has received illegal loan offers

Nearly every third resident in Latvia or 31% of respondents admit having received offers to use illegal loan services, as concluded in a survey performed by Latvian Alternative Financial Services Association and SKDS.

Libya opposed to EU's idea to establish migrant centres in North Africa

Libya is against the solution of the European Union to set up migrant centres in the North African country as a means to keep migrants from arriving in the bloc and Libya would not be convinced with financial support, its Prime Minister Fayez al-Sarraj has noted.

Arrest warrant on Catalan ex-President cancelled by Spain

The Supreme Court of Spain cancelled a European arrest warrant for former Catalan regional leader Carles Puigdemont, as Germany refused to extradite him to face accusations of rebellion for declaring the independence of Spain's region, Catalonia in 2017.

Latvian government plans to allow handing expired food to charity

Latvia’s Agriculture Ministry has prepared amendments to the Law on the Supervision of the Handling of Food that provide permission to hand over certain types of food products to charity after the end of their expiry date.

Estonian industrial producer prices up 2.9% since June 2017

Estonian industrial producer price index has risen by 2.9% between June 2017 and the first summer month this year, resulting in an increase of export prices as well, Estonian statisticians have estimated.

Putin urges NATO to quit «irresponsibly» developing ties with Ukraine, Georgia

Russia's President Vladimir Putin cautioned NATO against developing deeper relations with Ukraine and Georgia, evaluating such a policy was irresponsible and would have consequences for the military alliance.

Latvian parliament not in a hurry to support president Vejonis for a second term

Political parties represented in the Saeima are not eager to support President Raimonds Vējonis for his remainder for a second term.

Weather in Latvia will remain warm and even hot at times

Weather in Latvia in the nearest couple of days will be dictated by a cyclone. Because of that the sky will be partially covered by clouds; thunderstorms are also expected, as reported by State Environment, Geology and Meteorology Centre.

Hungary sued in EU Court for criminalising help to illegal immigrants

The European Union's executive body has stated that a law in Hungary that criminalises support for illegal immigrants is in breach with EU law and Hungary has now been referred to the European Court of Justice for the alleged non-compliance.

Estonians buy alcohol in Latvia; country loses EUR 20 million in six months

Latvian stores located close to the Latvian-Estonian border have sold 1.6 million litres of strong alcoholic drinks in the first half year of 2019. This means Estonia has lost more than EUR 20 million in taxes, according to data from Association of Estonian Alcohol Producers and Importers.

Lithuania’s election watchdog slams ruling LFGU over popular TV series

Political messages can be channeled in various ways and the ruling now Lithuanian party, LFGU has chosen a very delicate way of the communications – through a TV series featuring the beauty and the ambiance of Naisiai, a picturesque settlement in Siauliai district.

Association: around 3,3000 people know of their HIV infection but receive no treatment

HIV remains a serious problem in Latvia – around 3,300 people are aware of their status but receive no treatment and continue spreading the infection. Because of that, it is necessary to act quickly for Latvia to lose its status as HIV kingdom and limit the spread of the infection, says Baltic HIV Association, informing decision-makers and responsible officials in institutions and hospitals about the HIV/AIDS situation.

Driver shortage may force reduction of international road haulage volumes

Latvia’s road haulage companies have started experiencing shortage of drivers. On top of that, if employment conditions for residents of non-EU member states do not change, it may be necessary to reduce the volume of road haulage volumes, says Latvijas auto president Valdis Trēziņš.

Lattelecom’s turnover up 9% in first half-year of 2018

Lattelecom Group’s turnover reached EUR 98.7 million in the first half-year of 2018, growing by 9% in comparison with the same period of 2017, according to unaudited financial results.

1,140 fewer births registered in Latvia in 2017

Since 2016 the number of births in Latvia is declining again. Compared to 2016, a total of 1,140 births fewer were registered in 2017. Also, the provisional number of births registered over the first six months of 2018 (9,664 children) is by 664 children smaller than that registered over the respective period of 2017.

Citadele Bank decides to reform Lithuanian subsidiary as a branch office

Citadele Bank has decided to reform its Lithuanian subsidiary as a branch office, as confirmed in the statement the bank submitted to Nasdaq Riga.

Russian pension age hike discussed amid protest outside Duma

As the Russian paliament votes on the proposal to gradually increase he pension age to 65 for men and 63 for women, some 200 people were seen protesting against the reform in Moscow.

Corruption watchdog chief says bureau has done no illegal actions

After going through Corruption Prevention and Combating Bureau’s past investigative activities, the bureau’s chief – Jēkabs Straume – found it confusing that officers often took no appropriate actions after acquiring evidence or receiving indications regarding necessary steps.

Illegal border crossings to Estonia on rise after Russia World Cup

Football fans with temporary residency permits of the Russia World Cup, or fan Ids, are trying to illegally cross the Russian border with Estonia, a member of the European Union.

Estonian 13-year-old lethally overdoses fentanyl

Estonian prosecutors have accused a 15-year old of negligent homicide after a girl, 13, passed away from fentanyl overdose.