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Tuesday 16.10.2018 | Name days: Daiga, Dinija
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Swedbank: weak growth in Europe to force Latvian enterprises to raise competitiveness

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Lija Strasuna

Despite the weakness of the European economy, Latvian entrepreneurs continue to increase export, also balancing domestic demand in the process. Export is growing. This is mostly due to the largely painful decisions businessmen had to make during the crisis, as said in the economic survey of Swedbank.

Many European countries face competition problems. They usually resolve them by employing a similar strategy Latvia used not too long ago – reducing salaries. Latvian businessmen no longer have access to such instruments. Instead, they need to use opportunities of investing in production and new product or services development. If this is not done, competitiveness will slowly fade away, said the bank’s economists Martins Kazaks and Lija Strasuna.

According to then, the global economy will grow by 3.1% this year and only slightly more in 2014. An expansive monetary policy and structural reforms in developed countries will not be able to fully prevent the negative influence of the reduction of debt obligations and budget consolidation. Measures aimed at stimulating economic development will be the main balancing card for growth – these countries will generate 80% of the total global economic growth in 2013 and 72% in 2014.

“The good news is – uncertainty in the world will reduce. The worst, hopefully, is over. Negative and positive risks are now more balanced,” – say the economists. A better attitude is in the base of the positive risks. This balances a more successful resolution of political challenges, as well as better results from economy stimulating measures. The main negative risks remain because of deep problems in Eurozone, including the situations in Spain and Italy. The long political dead end in USA can worsen growth even more than it is expected. The tension in China’s and Japan’s relations can threaten global economic growth. This also applies to geopolitical risks in the Middle East.

At the same time, the weak growth in Europe will force Latvian entrepreneurs to improve their competitiveness. For example, southern European countries are currently actively reducing workforce expenses, including salaries. Basically, this is the same medicine once used by Latvia.

The strong side of Latvian enterprises is their relatively low level of debt obligations and a good financial situation. Latvian businessmen have a temporary advantage, which should not be missed. There was a impressive increase of investments registered in the beginning of 2012, which rapidly decreased during the year. Investments are necessary. Industrial output is currently at pre-crisis level.

“If there are no reasonable investments, this competitiveness advantage, which formed after long and work, will disappear quickly. In order to continue increasing export and create a balanced and strong economic growth, we need to invest further,” – notes Strasuna.

Ref: 102.109.109.5705


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  1. JPR says:

    They will make the people suffer!

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