High inflation and rising interest rates have a negative impact on the operations of most companies and weaken liquidity indicators. Because of these problems, companies are forced to sacrifice growth in favor of efficiency – “Intrum” research reveals that this year, Latvian businessmen are less likely than businessmen in the other Baltic countries to put the growth of their company as the main priority. In this respect, Latvia also lags behind European indicators.
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In Latvia, only 42% of entrepreneurs indicated that they plan to focus on the growth of their business this year, 43% will do so in Estonia, 46% in Lithuania, while on average in Europe 51% of respondents plan to do so, according to the latest European payment report 2023 of the leading European credit management company “Intrum”. data.
At the same time, a much higher proportion (64%) say that reducing costs and improving efficiency is a top priority for their organization this year.
“During the economic recession, most Latvian companies have switched on the “survival mode” in order to more successfully survive the challenges caused by inflation and high interest rates. Although for many such a strategy is the only logical solution in the current situation, it will of course also have its dark side. Payment delays and the financial pressure will force many entrepreneurs to re-plan or even postpone investments in the growth and expansion of the company, thus slowing down the development of Latvia’s business environment as a whole,” explains Ilva Valeika, general director of “Intrum” in the Baltics.
In the European Payments Report, 66% of respondents predict that overdue invoices will increase over the next 12 months. As the main reasons for payment delays, the majority of entrepreneurs cite disruptions in supply chains, debtors’ financial difficulties, rising inflation and interest rates, geopolitical uncertainty, climate risks, or intentional non-compliance with payment deadlines by customers.
Meanwhile, financially strapped workers are increasingly demanding higher wages than usual. 81% of Latvian companies expect that by the end of the year they will face demands from employees to increase wages.
“High inflation and rising labor costs are impacting payment learning, forcing companies to devote time and resources to stabilizing liquidity. Secure cash flow and proper credit management will be key factors to overcome the current challenges. Consequently, 45% of respondents say they are so focused to the management of their company’s economic risks, that they have neglected initiatives that would make the company a more attractive player in the market,” says Valeika.
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2023-06-27 07:52:53
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