Recently it was confirmed that the growth of the Latvian economy slowed further, to just 2.5% year-on-year, the slowest rate of growth for four years.
The only surprising thing about this is that it seems to have surprised some observers but as I tried to argue recently, where is growth supposed to come from?
Forecasts are not adjusted on a whim, nor should they be, but the Ministry of Finance’s forecast (at the time of writing the one for June 2014)of 4% growth this year is just not going to materialize. With annualized growth of just 2.8% and 2.5% for the first two quarters of 2014, the economy would have to grow 5.2% on average for the last two quarters and that is just not going to happen – if anything, the external environment is deteriorating e.g. due to the newly imposed Russian sanctions although the impact on Latvia will be nowhere – NOWHERE!! – near this ridiculous “estimate” of 50% of GDP…..
With growth slowing down it is not strange at all that so does job creation – a graph of quarterly employment, adjusted for seasonal effects, is presented below. Whereas employment declined heavily, by more than 200,000 persons during the recession of 2008 – 2010, it improved again steadily after renewed growth from late 2010 but is now at a virtual standstill at some 895,000 persons.
Figure 1: Employment in Latvia (1000s), quarterly data, 2008 – 2014, seasonally adjusted
(Please note that the second axis starts at 800(000) for improved visual display of the data)
Source: Central Statistical Bureau and own calculations
The immediate future is thus rather bleak in terms of growth and employment and the sole beneficiaries of this data seem to people like myself, i.e. economists – the current data seems to give us a nice back-of-the envelope estimate of underlying productivity growth of around 2.5%. Not bad but not thrillingly high either.
Morten Hansen is Head of Economics Department at Stockholm School of Economics in Riga
Komentāri (33)
marchaeva 28.08.2014. 15.34
Kāpēc autori to piesaukto “to just 2.5% year-on-year, the slowest rate of growth for four years” nesalīdzina ar ES vidējo un piem. Poliju, Lielbritāniju, īriju vai Somiju? Nerunājot nemaz par tuvajām valstīm – Poliju, Lietuvu un Igauniju?
2,5 % ir ļoti labi, ja salīdzina ar citiem.
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marchaeva > marchaeva 28.08.2014. 17.42
So the sick man of Europe, our neighbours, Poland and Finland as well as average EU numbers are like that non-impressive 87 year old grandpa? Hmm.
I wonder where are the young stallions, then?
How about a straight forward simple raising of untaxable minimum to eur 400 and beginning to tax natural gas with excise tax in transport?
I am quite sure this will significantly increase turnover, tax income and decrease tax commotion in low-wage earners sector.
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Pastniece > marchaeva 30.08.2014. 16.05
Jūsu vienīgais pamatojums neapliekamā minimuma celšanai ir “I am quite sure”. Ar šādu argumentu diez vai kādu pārliecināsiet par sava viedokļa pareizību, atskaitot cilvēkus, kas domā tieši tāpat.
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marchaeva > marchaeva 01.09.2014. 20.02
Ne tikai. Arī milzīgi lielā ienākumu nevienmērība, ar nodokļu lielo slogu mazo algu pusē. Arī aizbraucēji vairumā te pelnīja mazās algas. Līdz ar to zāles ir acīmredzamas – nodokļu slogu, un īpaši nopelnīto algu nodokļu sloga samazināšana mazāk pelnošajiem, ja vidējā alga valstī ir virs eur 700, tad skaidrs, ka neapliekamajam minimumam ir jābūt samērojamam ar ES praksi. Īpaši tanīs valstīs uz kurām tiek braukts visvairāk, piem. Lielbritāniju un Īriju, potenciāli Vāciju.
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Dzintars > marchaeva 28.08.2014. 17.18
2.5% is high compared to many other countries but it is not good – e.g. in the sense that is too weak growth to increase employment further, which is definitely not good news to the unemployed.
It’s a bit like saying: “I can run faster than my father”. And that is indeed true but not necessarily impressive (he is 87 and can barely see…).
Latvia grows faster than many of its peers but just not at an impressive rate right now.
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Gints Vēbers 28.08.2014. 11.55
This is indeed an important point and shows that some should spend less time bragging and more time improving the situation. But the author’s use of aggregate employment numbers is slightly speculative, seeing that the working-age-population ratio to population has actually increased since 2008 by approx. 10 %. (and the population shrunk as we know). Is this stats drama really necessary to make a point?
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