Economic overview and investment trends. Pēteris Strautiņš, Luminor September 26, 2018

Transcription

1 Economic overview and investment trends Pēteris Strautiņš, Luminor September 26, 2018

2 Baltic picture

3 Baltic economies During this and the next year Latvia is likely to be the fastest growing economy in the Baltics GDP growth in the Baltics, % 5 4 Estonia 3 2 Latvia 1 Lithuania P 2019P 2020P Source: Statistics offices data, Luminor forecast

4 Baltic economies Investment growth is faster here Investment in fixed assets, annual change, % Estonia 0 Latvia Lithuania P 2019P 2020P Source: Statistics offices, Luminor forecast

5 Baltic economies Economic growth is turning migration trends, first in Estonia Migration flows in Estonia during the last three years Total net migration... Estonian citizens... EU citizens Source: Statistics Estonia

6 Baltic economies Turnaround in Lithuania is really impressive, though brief Emigration and migration in Lithuania during the last three years Emigration 0 Imigration Balance Source: Statistics Lithuania

7 Baltic economies This is a rough indicator, but it seems that Latvia lags behind other Baltics in turning around migration Net passenger flow (arrivals - departures) in sea ports and airport, the sum of last four quarters Airport Sea ports TOTAL Source: Statistics Latvia Luminor calculations

8 Latvian economy is growing bigger and smarter

9 According to the showball earth theory, the place looked like this 650 million years ago. After a while, climate rapidly jumped to a different equilibrium

10 You can t go in circles forever Debt reduction phase in economic cycle Income growth fed by exports reaches critical point Businesses invest too little Low housing investment Cautious estimates of potential growth Slow growth of wages and jobs Negative migration balance 10

11 Latvian economy Export melts the last pieces of ice Annual change of goods and services exports, in quarters % 25.0% 20.0% 15.0% Goods 10.0% 5.0% Services 0.0% -5.0% Avots: Latvijas Bankas dati, Luminor aprēķini

12 Latvian economy Nation s balance sheet has improved a lot 60% Net external debt vs GDP, total and main sectors 50% 40% TOTAL 30% 20% Households and businesses 10% Financials 0% -10% Government and central bank (net) -20% Source: Bank of Latvia data, Luminor calculations

13 Latvian economy The biggest sectors are growing Value added changes in 2017, forecast for 2018, % Agriculture and forestry -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Manufacturing Construction Trade Transports 2017 Information and telecoms 2018 Real estate Commercial services Government Education Source: Statistics office data, Luminor forecast

14 Latvian economy Manufacturing, thus exports is changing from inside Expected growth in manufacturing sectors in % -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% Timber and furniture Food and drinks Machinery Metal processing Chemicals and pharma Paper and printing Light industry Other manufacturing Source: Luminor forecast

15 Latvian economy Assuming that present trends in manufacturing will continue... Output in manufacturing sectors (EURm, Y2017 prices), if rate of growth estimated in 2018 continues until Below total output growth in this scenario, % Pārējā rūpniecība Metal processing and machinery Chems and pharma Paper and printing Timber and furniture Light industry Food and drinks Source: Luminor projections

16 Latvian economy Investment is growing, mostly in buildings Non-financial investment categories, four quarter sum, EURm Buildings, structures 800 Other fixed assets Equipment and machines Non-tangible investment Source: Statistics Latvia data, Luminor calculations

17 Latvian economy Offices and dwellings are in vogue Building permits issued in H1, 2017 and H1, 2018 in sq m, 000 Single family homes Secondary homes Apartments Hotels Offices Trade premises I-VI, 2017 I-VI, 2018 Annual growth rate: % For dwellings % for other buildings Industrial and logistics Education and health Other non-dwelling Source: Statistics Latvia

18 Why invest here?

19 Why invest here? On global scale, Latvia looks quite attractive for FDI FDI stock, ratio to GDP, Source: OECD 19

20 Why invest here? FDI in Latvia is growing, but in line with GDP, in recent times FDI stock, meur and ratio to GDP, % % % % 30% FDI stock % 10% Ratio to GDP 0 0% 20

21 Why invest here? Education is quite good, or at least widespread Share of people in age group who have at least secondary education, Source: Eurostat data 21

22 Why invest here? Also the share of people with tertiary education is above average Share of population in age group with tertiary education, %, Source: Eurostat data 22

23 Why invest here? Unemployment is falling, but there are places where people can and should work more The number of occupied job positions and self-employed, percentage of total population 60% 50% Greater Riga 40% LATVIJA Kurzeme 30% Vidzeme 20% Latgale 10% Zemgale 0% Source: Statistics Latvia data. Luminor calculations

24 Why invest here? Global Competitiveness Index looks mostly OK, with question marks Global Competitiveness Index produced by World Economic Forum is an interesting read, but be careful Some evaluations seem reasonable, but some are truly shocking, unimaginable nonsense Source: World Economic Forum 24

25 Latvians work really hard! 25

26 Enjoy!