Analytics, Employment, Interview, Latvia

International Internet Magazine. Baltic States news & analytics Thursday, 27.06.2019, 07:39

Swedbank: Latvia may face social inequality

Nina Kolyako, BC, Riga, 28.12.2010.Print version
Latvia faces the risk of "two-speed" society, where the threshold will be whether a person has a job or not, Swedbank’s chief economist Dainis Stikuts pointed out to business portal A "two-speed" society would mean that the conditions for people with jobs would gradually improve, while the unemployed would still see no improvement even during the economic recovery period, which would mean increasing social inequality.

"Therefore it is even more appalling that this year our government failed to carry out, as International Monetary Fund says, "quality structural measures", which would improve employment and non-repressive reduction of the shadow economy. Hopefully next year the government will make use of the economic recovery in order to finish the structural reforms," added Stikuts.


Chief economist forecasts that, with the increase of economic activity in 2011, the demand for new jobs will also increase, however, the unemployment rate will still be fairly high – 17%, writes LETA.


In addition, it is also possible that unreported unemployment will increase, because government's intended increase of minimum wage and taxes on labor will not advance the reduction of shadow economy. "Of course, the situation will vary in different areas, however, there is no basis for a rapid increase in wages. Even though the nominal minimum wage will most likely increase, inflation will hold back the actual purchasing capacity," Stikuts commented on market tendencies in 2011.


According to Swedbank’s economists, the inflation rate will be 2.5 – 3%, which can be considered normal. Stikuts points out that the prices for goods and services will also increase, which will be influenced by an increase in added-value tax and several other tax rates. The influence of global prices on Latvian consumer prices, according to Stikuts, will be insignificant.


According to Swedbank’s, gross domestic product will increase around four%. "The economic development will be rather dynamic. The exporting sectors of timber, metal and chemical goods will be most active. Construction and domestic trade sectors will recover from this year's lowest production level", said Stikuts.


Even though GDP will increase and the situation in labor market will slightly improve, Stikuts believes that Latvia will still feel the consequences of crisis, as they will be imprinted in residents' and entrepreneurs' minds and will affect their decisions.


As reported, in this year's third quarter, GDP increased by 2.9% in comparison with same quarter in 2009, and 19.4% of economically active people were registered as job-seekers.


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