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International Internet Magazine. Baltic States news & analytics Thursday, 24.09.2020, 09:31

Baltics must invest to ensure economic resilience isn't short-lived

BC, Vilnius, 17.09.2020.Print version
With the Baltic economies weathering the coronavirus pandemic much better than other EU members, the countries have to focus on further investment so that their economic resilience is not short-lived, Swedbank Latvia's chief economist Liva Zorgenfreija said, cites LETA/BNS.

"As to the GDP fall (...) in the first half of the year, (the situation) in the Baltics was rather better than in the rest of the world and especially in South European countries. It is mostly due to better luck and due also to the quick response (...) from the governments that helped us to survive this first wave with milder lockdowns," she said during Swedbank's economic forum. 

However, a comparison of Lithuanian, Latvian and Estonian economic data for the first and second quarters reveals differences. For example, private household consumption was more affected in Latvia than in Lithuania or Estonia.

"It is very surprising because, technically, restrictions were quite similar and the countries were hit in a similar way in terms of the virus, but in some aspects, it is not really reflected in statistics in exactly the same way," the Latvian economist said.

"For Lithuania, we know that the elections are coming and that might be the reason why the government is more willing to spend and support the economy", she said.  

Governments worldwide, including the Baltic countries, are playing an increasing role in the economy and economic stimulus, and the fact that the public debts of Lithuania, Latvia and Estonia are much lower than elsewhere in Europe is viewed favorably, too, according to Zorgenfreija. 

It is very important that the countries use borrowed money and EU recovery funds to digitalize their economies and attract new investments, the economist said.

"This is the chance to make the most out of these investments to really move towards a new type of economy, a greener and more digital one," Zorgenfreija said. "The ease of doing business is quite highly rated in all three economies. This is of course beneficial for further investments. But what is lagging behind is government effectiveness. Given that the role of government is increasing and the quality of government will become more and more important, this is something we need to think about," she said.

Based on data from Eurostat, second-quarter GDP contracted by a quarterly 5.5% in Lithuania, by 6.5% in Latvia and by 5.6% in Estonia, compared to 11.8% in the euro area and 11.4% in the whole of the EU.

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