Editor's note

The global credit turmoil has not fortunately caused much strain on the Baltics’ markets, which still seem as a safe heaven without big questions over spreads between sovereign states. However, soaring commodity prices, driven in part by lower dollar, also reflect a slow-down in global economy.

Housing boom in the Baltics seems over now; the apartment prices are sliding raising investors’ fear that the housing slump could trigger a wider economic “hard landing”. Foreign buyers have almost disappeared and existing investors are in a dwindling waiting state. Still rents are rising because more locals are choosing to rent rather than buy. There was a record deal recently: around 7.5 th euro paid for a sq m in Riga’s downtown apartment in a Jugend-still house.

Besides, current account deficit in the Baltics is around 20% and private credits’ share is still quite high, e.g. around 120% of GDP in Latvia. At the same time inflation reached 10-15%.

In these circumstances, the new EU states envisage new troubles on their way towards euro. Some states can not fit into rigid rules on fiscal policy imposed by the Maastricht criteria, e.g. Lithuania and Latvia. Some simply refused to follow them, e.g. Hungary in a fear of negative implications.

Quite remarkable is the parity equilibrium between euro and dollar: in 2001 the euro “started” at a point of 1.30 to one dollar, then shrank to about 0, 95. It seems that dollar is still in its D-day – “D”, as in downward, devaluated and dumped. This fact has its implications for Baltic States’ trade with eastern neighbors, first of all, with Russia. Strategists say that they expect the greenback to recover in the second half of the year.   

Budget airline prices have made the Baltics easily accessible for foreigners and tourist sector is both in good shape and booming. 

What will take place during this month, among most important events, is the first spring summit of several EU’s summits, and coming up is the 50^th anniversary of the very first in the “common market” European Parliament’s session.

So, an exiting springtime lies ahead.