In the second half of this year, the economy of the Baltic states will begin to recover, and at least in Latvia and Lithuania there are hopes for a rapid increase in state investment, the chief economist of “Bigbank” Rauls Eames informed the agency LETA.
The main challenge of Latvia, Lithuania and Estonia is the small and open economies, so the problems in all three countries are similar, and the economic growth rate will largely depend on the success of our trade partners, the economist explains.
According to the data of the Central Statistical Administration of Latvia, published last November, from January to September 2023, the share of Latvia’s five largest export partners – Lithuania, Estonia, Germany, Sweden and Russia – made up 48.7% of the total export value. This is 0.4 percentage points more than in the same period in 2022.
Basically, there are three possible scenarios for the Baltic States, according to the economist. Market expectations predict that interest rates will begin to decrease already in March or April, commercial banks believe that this will not happen before August or September, but the Organization for Economic Cooperation and Development predicts that interest rates in Europe will begin to decrease only at the beginning of 2025. Eames does not believe in a sharp drop in interest rates, and past events do not support this either, as the ECB tends to be slow to respond to the necessary changes.
Eames adds that Germany experienced a recession last year as energy prices stabilized at high levels, directly affecting companies where energy costs make up a large part of their production costs.
“Unfortunately, this causes a chain reaction. The problems in the German economy have a negative impact on the economy of the Scandinavian countries, which also refers to the Baltic countries. There is reason to believe that if Germany has corrected its economic indicators downwards, then the Nordic countries have also done so,” says Eames.
The current forecasts show that among the Baltic states, Latvia has the best performance, Estonia the worst. Economic growth of almost 2% is predicted for both Latvia and Lithuania in 2024. Estonia’s central bank “Eesti Pank” predicted in December that Estonia’s economic well-being will decrease by 0.4%. According to “Bigbank” estimates, this forecast is even too optimistic.
Latvia and Lithuania are positive about the development of the labor market, while an increase in unemployment is predicted in Estonia. In Lithuania and Latvia, the unemployment rate will remain between 6.3% and 6.5%, while in Estonia “Eesti Pank” predicts that the average unemployment rate will reach 9% in 2024.
2024-02-11 11:25:44
#Economist #year #economy #Baltic #states #recover
