Nordea Survey Economic Outlook: Positive Trends in the Economy of Latvia

Today, on 30 August, the Senior Economist of Nordea Andris Strazds presented the key conclusions of the latest Nordea economic survey Economic Outlook. Nordea economists outline that the situation in the national economy of Latvia is gradually improving and the „lowest point” is already behind. The largest improvements are observed exactly in external trade, though also household consumption indicators are slightly increasing. It is anticipated that economic increase in quarterly terms will be experienced till the end of the year, although slight reduction will be faced as compared to the previous year. Besides, the recovery of domestic demand in 2011 – 2012 will account for moderate GDP increase.

„Similarly as our neighbouring countries, Latvia has benefited from the economic recovery of the region and also the world. Special attention should be drawn to healthy economic development of such important export markets as Northern countries, Germany and Russia and also gradual recovery of Estonia and Lithuania. Although increase of import has been moderate, the overall trade balance is improving and such improvement contributes to economic recovery. Notwithstanding that the export indicators have gone up from the very bottom, further increase will be moderate” outlined the Senior Economist of Nordea Andris Strazds, by adding that net export amounts to more than one fourth of Latvia’s economy: „the remaining three fourths are production of goods and provision of services to the domestic market.”

„Good news are that several indicators evidence on stabilization of domestic demand. In the second quarter of the year retail indicators had gone up by 1.7% as compared to the first three months of the year and the consumption prices demonstrated a slight increment already in the first half of the year, what is indirect evidence that household consumption has slightly gone up. Most likely the economy is not booming because the amount of new investments is still shrinking. It is considered that the investors are kept back by uncertainty with regard development of demand and the comparatively low load of the existing capacity, some might also wait for the outcome of the parliamentary elections of October this year.”

„At present the household sector of the economy of Latvia is facing a kind of paradox – the balance of households against commercial banks or the difference between household investments and loans issued to households in the first half of the year has improved by 200 million lats. At the same time the retail turnover demonstrates an increase as compared to the drastically low level last winter and the fall in prices has stopped. Therefore the actual income of people have gone up, even if it does not appear in the salary and employment statistics and such increase cannot be explained with disbursement of pensions this spring that were withheld last year”, told Andris Strazds.

The full text of the Economic Outlook is available under: www.nordea.com