“Coface” representatives expect that Lithuania’s GDP will grow by 1.6% this year, while Estonia’s is forecast to fall by 0.4% for the second year in a row.
Economic recovery is predicted for Lithuania in the second half of this year, while in Latvia and Estonia – later. “Coface” economists warn that exporting companies and their related industries, including transport, could be exposed to a high risk throughout the Baltics in the coming year.
“Coface” economists are cautious about the global economy in the latest published quarterly barometer of the world economy, including noting that an additional factor of instability on a global scale is political changes – in 2024, there will be 60 national-level, presidential or parliamentary elections in the world.
“Coface” chief economist in the Central and Eastern Europe (CEE) region Gžegož Selevičs mentions that, taking into account the general economic situation in CEE and geopolitical risks, the GDP growth forecast for Latvia this year has been reduced to 1.8%. This was mainly due to the delay in economic recovery. Forecasts for the rest of the Baltic States have also been reduced.
Selevičs points out that the main risks for all Baltic states are external. The slowdown in the economy was recorded in Western Europe, including Germany, which is the most important export destination for the Baltic States. According to the latest data, this slowdown in the economy continues, and it is linked to various sectors, especially manufacturing. Improvements are expected no earlier than the second half of this year.
However, “Coface” predicts that the growth of the Baltic countries should recover. Both Latvia and Lithuania should benefit from the recovery of household consumption, but its start in Latvia is predicted a little later than in Lithuania. In Lithuania, although inflation will not continue to decrease, a relatively favorable labor market situation with stable wage growth will lead to higher consumer spending, and growth will be supported by both private and public investment, partly due to the flow of funds from European Union (EU) funds. A similar situation should also exist in Latvia, where significant EU funds are planned to be acquired in 2024.
The “Coface” economist also points out that the weakest economic activity in the Baltics is observed in Estonia, which is facing another year of recession. According to Selevičs, weak external demand, sluggish investments and low production activity will again limit the growth of the Estonian economy in 2024. In addition, household consumption is not expected to recover in the near future as the economic downturn affects the labor market and unemployment rises. Due to the geopolitical conditions mentioned above, exporting companies are most at risk in all the Baltic States, as well as other industries that depend on it, such as transport.
2024-02-26 20:39:00
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