Latvian business cuts fat

RIGA - Compared to 2006 and 2007, the Latvian economy has become stronger, more robust and more sustainable against external disturbances and risks, says Swedbank Chief Economist Martins Kazaks in an interview with Nozare.lv. He stressed that businesses have gained strength by improving their efficiency, competitiveness, conquering new markets and market shares, introducing new products, and creating deposit savings.

Kazaks believes that businesses are now in much better shape than in 2007, when they were “fat from eating cakes.”
A real estate bubble no longer exists, and banks have also become more durable. There are no such systematically important banks, such as Parex Bank, that the state should bail out in case of problems, added Kazaks. Most of the banks have holding companies in the Nordic countries, which could take care of them. The economist believes that the state finances are also in better condition, although there still is a budget deficit.

But one of the weak points is households. The level of unemployment is high, the deposit portfolio is not increasing, and the growth in income is being spent, which means that the possibility of surviving another crisis for households is slim, explained Kazaks.
“All in all, the economy is stronger because there are less extremes, but that does not mean that we are immune from global problems,” he stressed.

Kazaks noted that currently, a peaceful period in the global economy cannot be expected. “Maybe a period of apathy, when again something is promised and believed, but not a peaceful period. This can be expected only when structural reforms take place. Currently, the solutions are not widespread,” he said.