OSLO -- Baltic consumers are catching up with the rest of the world in terms of their spending power, according to a new report.
Labour
market improvements have substantially increased the average purchasing
power of consumers in the Baltic Rim region and created new
opportunities for Nordic companies. It is no longer just a question of
the huge potential future demand. Consumer spending is indeed expanding
rapidly and has become the primary growth engine in all the countries. That is one of the conclusions presented by Nordea's economists in their semi-annual publication Baltic Rim Outlook. The Baltic Rim consists of Russia, Poland, Latvia, Estonia and Lithuania.
Labour market developments in the
Baltic Rim economies are spectacular, the report says. In many ways they resemble
developments in the Nordic labour markets, only much more extreme. Wages are growing by more than 30 per cent in Latvia, 6 million
new jobs have been created in Russia since 2000 and the unemployment
rate has fallen 7 percentage points in Poland since the EU accession in
2004.
Among the Baltic countriesEstonia leads the way in the correction to more sustainable growth
rates.
"We are comfortable with our view that overheating risks are
history even if inflation continues to rise before the trend reverses,"
says Mika Erkkila, Senior Analyst, who is Nordea's expert on economic
developments in the Baltic countries and Russia.
Real estate prices are
also reaching their turning point. In contrast, the growth rate in
Latvia is still far too high for policymakers to feel comfortable, the report suggests.
The
red-hot pace in bank lending is slowing, but the very large current
account deficit has only stabilised, at best. Although real estate
prices have fallen since the spring, calling this trend a broad
slowdown would be premature according to Nordea.
Lithuania can gain some solace from the conclusion that it has not developed a serious
overheating problem - at least not yet.
Nordea's report comes less than a week after another piece of research by GfK offered similar conclusions.
