Latvia's economic growth forecast has been increased from 2.5% to 2.8%, according to the latest Baltic Economic Outlook by DNB banka.
The geopolitical headwinds from the East undermined the economic performance of the Baltic States and forced them to search for fast and effective solutions. Cutting dependence on Russia's market and bridging new external trade links were the core tasks for both politicians and the business community. However, looking from today's perspective, we can tentatively state that the Baltic States once again proved their exceptional flexibility and talent to adjust.
Growth is expected in the entire Baltic region both this year and the coming year, furthermore, it is said that the growth will gradually accelerate. The potential mid-term growth rate in all Baltic States is similar – about 4%, which most likely will be achieved in 2017.
The outlook indicates that the largest gross salary increase in 2014 was registered in Latvia (6.6% in the fourth quarter, year-on-year), while the largest increase in employment was registered in Lithuania – 1.8%.
"The Baltic States' economies differ domestically. Their development depends on highly qualified labor force and diverse knowledge, offering the opportunity to expand the industries. Each country has its peculiarities, however, there is much in common, too, for example, a fast commercial service export development during the post-crisis period," says Peteris Strautins, economy expert at DNB banka.
"The labor market of the Baltic States is rapidly "warmed up". The longest process is advanced in Estonia, but now this process is developing most rapidly in Latvia. Last year, the level of wages in all three Baltic countries grew by more than 5% per year ", says Peteris Strautins. "It should be noted that most sharply gross wages grew in Latvia (6.6% – in the 4th quarter, considering the annual level), in turn, the number of employees – in Lithuania, 1.8%.
Differences are evident, if we consider the trend of lending. In 2014, lending has continued to intensify in Estonia, where the lowest post-crisis level of loan portfolios have already achieved in the 1st half of 2012. In contrast, reduction of portfolios in Lithuania and Latvia continues and in Latvia in the past year it has even accelerated. In Lithuania it was close to the zero point of fracture. In January, a growth portfolio of households was registered by 0.4%, and the total volume of loans to enterprises dropped by another 2.5%. P. Strautins thinks that there are signs that in 2015 the lending in Latvia finally activates. At the beginning of the year 2015, the reduction of portfolio was smaller than last year, and there are positive signs in the demand for mortgage loans.
