bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Monday 22.07.2019 | Name days: Marija, Marika, Marina
LatviaLatvia

Swedbank: US and Eurozone economies expect difficulties; Latvia expects growth

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUSwedbank has drawn growth outlooks for Eurozone and USA downward pointing, whereas Latvia’s economic outlook has been increased 3.3%.

In spite of weaker exports, Latvia’s economy demonstrated its most rapid growth in the past seven years. This allows increasing Latvia’s growth outlook to 3.3% for 2019. Although growth will remain good, it will slow down when compared to last year’s heights, according to Swedbank economists. Growth will be limited by weak external demand, increased load on production output, growing shortage of workforce and pressure from costs, which will become more noticeable this year. Still, there are many external and domestic risks that could affect growth.

World economy stagnates due to trade conflicts and growing uncertainty

«International tension reduces work trade volumes and together with political uncertainty and market fluctuations create negative effect for global growth. I would seem the trade talks between USA and China may have a positive outcome. Nevertheless, talks continue and neither side has lifted their import tariffs. Increased trade tension between these two superpowers remains a serious risk. On top of that, recently USA has come with a proposal to impose an import tariff on one more product imported from Europe, and has successfully wound up concerns about global trade and growth. And especially high risk for Europe is the possibility of USA deciding to impose tariffs on Europe-made cars,» says acting Swedbank economist in Latvia Agnese Buceniece.

Swedbank notes that the worsening of processing industry’s indexes in most developed countries had begun last year and continues in the beginning of this year. Political uncertainty has affected the general mood of households and businesses, limiting their desire to invest. However, a strong labour market improves employment and income rise, supporting continuous growth in the service sector. This contributes to economic growth and at least partially compensates the weak contribution of producing industries.

The world’s economic growth continues slowing down, from 3.6% last year to 3.2% this year, economists predict. Although this will happen slightly faster than predicted in January, it is still expected the slowdown to be gradual and controlled. Last year, the US economy reached this business cycle’s most rapid growth rate and will slow down this year from 2.9% to 2.1%. Under influence of processing industry, growth in Eurozone will be only 1.2% (1.8% in 2018). However, risks remain on the highest level of recent years, and they may seriously reduce growth rates or even create a new recession.

Central banks have reacted to the worsening of growth tendencies, reporting that they will wait and maintain greater caution when increasing rates. Both the European Central Bank and the US Federal Reserve System will likely maintain a pause both this year and the next and keep base interest rates on the current level, thereby supporting economic growth. Eurozone also plans additional measures to support lending in the banking sector.

Powerful rise of investments and stable households’ consumption supports Latvia’s economy

In a time when the world economy remains in one place, Latvia’s economy demonstrates the most rapid growth of the past seven years, Swedbank economists say. Last year, Latvia’s economic growth was more rapid than the average in Eurozone and Baltic region.

Economic growth was observed in nearly all industries except for finance sector and electricity production. Three of the largest sectors of economy – processing industry, trade, transport and storage – had experienced a slight slowing of economic growth. But all this was more than compensated by a moderately more rapid growth in construction and ICT, comments Swedbank.

Strong domestic demand, especially in investment activity, was the engine of economic growth, the bank notes. Export, on the other hand, demonstrated weaker contribution. Until now, last year’s dry summer played a role slowing export growth. This drought was responsible for grains and colza export decline and weaker re-exports of equipment and beverages.

Eurozone’s problems have not affected Latvia much so far, because exports focused on the Baltic and Scandinavian region, as well as Russia, where growth was more stable. Although openness in the era of growing protectionism is a weakness, Latvia benefits from the fact that its export sector is relatively diversified country and product-wise. Another plus is that the general economic growth is more balanced than it was in 2006-2008, Swedbank experts say.

«Although Latvia’s GDP growth this year will be rather good, it will slow down from last year’s heights. We expect economy to grow 3.3% this year and 2.5% next year. Growth is limited by weaker external demand, historically high load on production output, growing shortage of labour force and pressure from growing costs, which will become more apparent. These factors together with slower EU fund investment growth will be reflected to a more moderate construction and investment growth, which was a strong impulse for last year’s growth,» comments Buceniece.

«Export orders’ increase has stopped on a high level, which points to the fact that we cannot hope for better results this year. If this year’s summer turns out better for farmers, we can expect some improvement for exports in the second half of the year. Household consumption will become the main driving force of growth, which will benefit from good mood of households and better purchasing power, and slower growth,» says Buceniece.

Unemployment is already on the lowest level of the past ten years, and it continues declining from 7.4% last year to 6.7% this year. Labour force shortage will contribute to average gross wage rise, although this year wages will lose their growth effect this year and will grow 7% (8.4% in 2018), the bank predicts.

Considering that inflation will remain at 2.5%, improvement of purchasing power will be slightly slower than a year ago. Wage growth will be slightly ahead of productivity, creating risks for profitability and competitiveness of companies, economists say.


Leave a reply

Week in Lithuania: CB denies Swedbank’s Syria links, PM Skvernelis to change some ministers

Last week, PM Saulius Skvernelis revealed that the Government mulls taxing property and polluting cars, Lithuanian Railways said it will keep contract with Latvia's Sigmen, Court disqualifies itself from Paleckis case.

BNN summary of the week: Cutting a pie. Minimal wage. Dangerous games

Is there a pleasant aroma of a fresh pie in the air? Judging by events of the past week, the tasty smell of the 2020 budget has already spread across government corridors even though the dough is not ever ready.

Latvia among Baltic States with first quarter’s highest budget deficit

In Q1 2019, the general government budget deficit ratio to GDP in Latvia was higher than the average across the EU, according to data published by Eurostat.

Latvia’s industrial producer price level up 0.4% in June

Compared to May, the level of producer prices in Latvian industry rose by 0.4 % in June 2019. Prices of products sold on the domestic market grew by 1.5 %, but prices of exported products reduced by 0.7 %.

Curious career zigzags. From shipping schemes to a warm seat in Latvian Railway

Shadow of doubt over fraud worth five million euros. Career twists with Lembergs’ approval. Secret peace treaty following Uldis Augulis’ entry to Transport Ministry. Illegal state of monopoly in the industry. What hides behind Latvian Railway chief’s «spotless» reputation?

Estonian TransferWise hires Netflix’s ex-chief financial officer

Estonian-led financial transactions start-up TransferWise has announced expansion of its board of directors with the former chief financial officer of the American online television service Netflix, David Wells.

Ukraine to reform citizenship process following Russian passport move

Volodymyr Zelenskiy, the President of Ukraine, has ordered changes to the process for receving Ukrainian citizenship reacting to a Moscow decree increasing the number of Ukrainians eligible for fast-track Russian passports.

SES: barrels with chemicals found in Baldone are not harmful to people or environment

The barrels found in Baldone containing different chemicals do not present any direct threats to the environment or people, as reported by State Environment Service.

U.S. shoots down Iranian aircraft amid rising tensions in Persian Gulf

With American-Iranian relations being tense, U.S. President Donald Trump stated that an American naval ship had downed an Iranian drone that threatened the ship in the Arabian Sea.

NATO StratCom does not consider FaceApp more dangerous than Facebook

The US Democratic Party is concerned about Russian-made FaceApp, which allows its users to imagine how they might look like when they are old and retired. NATO StratCom, however, does not consider the app to be more dangerous than other apps users entrust their personal data with.

Additional information to be asked for in Latvian prosecutor general’s evaluation

Saeima deputies who initiated the investigation if there are reasons the justify dismissal of Prosecutor General Ēriks Kalnmeiers have been asked to clarify their request by providing more detailed information in relation to conclusions mentioned in their request.

Latvian minister wants more responsibility for the state in children rights protection

The new children’s rights protection model will delegate more functions to the state, said Latvian Welfare Minister Ramona Petraviča.

Scandinavian tourist killers in Morocco convicted to capital punishment

In Morocco, for the murder of two Scandinavian tourists, three Islamic State group supporters have been sentenced to death.

European Parliament urges Russia to release illegally arrested Ukrainian citizens

On Thursday, 18 July, European Parliament’s members accepted a resolution in which they invite Russia to unconditionally release all illegally and arbitrarily arrested Ukrainian citizens in Russia and occupied territories in Ukraine.

New York Times: stakes are high for Latvia in the fight against money laundering

US newspaper New York Times has published an article detailing problems with Latvia’s finance system, admitting that stakes are especially high in the fight against money laundering in this Baltic country.

Seats divided – Latvian MEPs find their jobs for the next several years

European Parliament has announced to composition of its parliamentary delegations. This includes the roles of Latvian MEPs for the first two and a half years of service, as reported by EP representative Jānis Krastiņš.

Defiant Lithuanian Parliament Speaker snubs party’s decision on his ouster

The summer’s record heatwave has withdrawn, but the Lithuanian legislature, Seimas, is sizzling – the chamber’s speaker, Viktoras Pranckietis, remains defiant, snubbing the ruling Farmers and Greens (LFGU) Council’s nearly unanimous decision to oust him from the post, following the signing of the LFGU-led new coalition agreement in early July.

Latvian Saeima committee supports increasing teachers’ wages to EUR 750

On Thursday, 18 July, Saeima’s Budget and Finance Committee supporter proposal for division of finances to increase minimal wages of teachers to EUR 750 in 2019.

260 more marriages than last year registered in Latvia so far in 2019

In the six months of 2019, a total of 4 730 marriages were registered, and that is 260 marriages more than during the same period of the previous year.

Dentists in Latvia may be offered compensation for work in country’s regions

To improve accessibility of healthcare services outside of Riga, it is planned to expand the range of medical specialists who are eligible for financial support when choosing to work in regions, as reported by Healthcare Ministry.

Open arms for Lidl – Estonian competition watchdog predicts lower prices

Expecting the entry of the German supermarket chain Lidl on the Estonian market, the country’s Competition Authority expects healthier competition and lower prices.

Latvian president says funding is a non-issue if public media are organized

Resolving the public media crisis will make funding a non-issue, said Latvia’s President Egils Levits in an interview to public broadcaster LTV Rīta panorama programme.

Latvian minister shocked over situation with orphans in the country

Latvia’s Welfare Minister Ramona Petraviča is unpleasantly surprised with institutions’ and municipalities’ opposition towards orphaned children ending up in a family-like environment, saying it’s an «inconceivable situation».

No measles’ vaccine for child? 2 500-euro fine planned in Germany

As Germany seeks to curb an increase in measles’ cases, the federal government has passed a plan of mandatory vaccinations for children and school staff and a fine of up to 2 500 euros for lacking a vaccine.

Latvia commences procurement for public transport services in next decade

A procurement process has been announced for public transport services in Latvia for 2021-2030, as confirmed by Road Transport Directorate.

Newest comments