Business Monitor International


Latvia Business Forecast Report

Published 26 August 2014

  • 51 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Latvia Business Forecast Report

Core Views

  • Latvia's economic recovery will continue into 2014 and beyond, although we emphasize that strong headline real GDP growth is largely a result of statistical base effects. We see growing scope for the government to ease up on its long-held policy of fiscal austerity going forward.

  • We anticipate the moderation in consumer prices in Latvia to pick up slightly in 2014. We forecast inflation to average 1.0% in 2013 and 1.6% in 2014.

Major Forecast Changes

  • We have downgraded our forecast for Latvia's real GDP growth to 1.9%, from 3.8% previously as the escalating trade war between the EU and Russia is adversely affecting Latvia's goods and services export prospects.

  • We now forecast Latvia to grow by just 1.9% in 2014 and 3.4% in 2015, from a previous forecast of 3.8% for both years previously. As the 2014 budget has been predicated on real GDP growth of 4.0% in 2014 and 2015, we see considerable risks that government revenues will arrive below projections due to weaker VAT and corporate tax receipts.

Key Risks To Outlook

  • The prevailing risk to our forecasts for Latvia remains the persistent eurozone sovereign debt crisis. A further deepening of the crisis would pose downside risks to most of our forecasts.

Macroeconomic Forecasts (Latvia 2012-2015)
Indicator 2012 2013 2014f 2015f
Real GDP growth, % y-o-y 5.2 4.1 1.9 3.4
Nominal GDP, EURbn 21.6 22.9 23.4 24.7
Consumer price inflation, % y-o-y, eop 1.6 -0.4 2.0 3.0
Exchange rate EUR/USD, eop 0.81 0.75 0.79 0.83
Budget balance, % of GDP -1.4 -0.9 -1.3 -1.5
Current account balance, % of GDP -2.0 -0.6 -3.2 -2.9
National Sources/BMI

Click here to explore data

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Ratings
7
Foreign Policy
8
Could Latvia Be The Next Crimea-
8
Table: Political Overview
8
Long-Term Political Outlook
10
Slower Growth And Ethnic Tensions Key Themes To 2023
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Ratings
13
Economic Activity
14
Weaker Growth From Ukraine Crisis
14
Table: Economic Activity
14
Fiscal Policy
16
Defence Spending To Rise
16
Table: Fiscal Policy
17
Balance Of Payments
18
External Accounts Remain Robust
18
Table: Current Account
18
Chapter 3: 10-Year Forecast
21
The Latvian Economy To 2023
21
Looking For A 'New Normal'
21
Table: Long-Term Macroeconomic Forecasts
21
Chapter 4: Business Environment
23
SWOT Analysis
23
BMI Business Environment Risk Ratings
23
Business Environment Outlook
24
Institutions
24
TABLE: BMI BUSINESS & OPERATION RISK RATINGS
24
TABLE: BMI LEGAL FRAMEWORK RATING
25
Infrastructure
26
TABLE: LABOUR FORCE QUALITY
26
TABLE: EMERGING EUROPE - ANNUAL FDI INFLOWS
27
Market Outlook
28
TABLE: TRADE & INVESTMENT RATINGS
28
Operational Risk
29
Chapter 5: Key Sectors
31
Freight Transport
31
Table: Road Freight
32
Table: Rail Freight
32
Table: Maritime Freight
33
Table: Air Freight
33
Other Key Sectors
35
Table: Pharma Sector Key Indicators
35
Table: Telecoms Sector Key Indicators
35
Table: Infrastructure Sector Key Indicators
36
Table: Food & Drink Sector Key Indicators
36
Table: Autos Sector Key Indicators
36
Chapter 6: BMI Global Assumptions
37
Global Outlook
37
Growth Increasingly Polarised
37
Table: Global Assumptions
37
Table: Developed States, Real GDP GrowtH, %
38
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
38
Table: Emerging Markets, Real GDP Growth, %
39

The Latvia Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Latvia and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Latvia's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Latvia's economic and industry growth through end-2018.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Latvia's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Latvia, including currency volatility, the commodity price boom and protectionist policies.

The Latvia Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Latvia economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Latvia through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Latvia Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2018 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Latvia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Latvia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Latvia over the next 5-years?

BMI's Latvia country Risk Rankings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Latvia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Latvia.
  • Political Stability and Risk Assessment - BMI's Risk Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings and trends for Latvia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Latvia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Latvia, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Latvia's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

Which industry sectors in Latvia will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Latvia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2009-2013, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2014-2018, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express