The mood index of Latvian entrepreneurs achieved a level of 52.95 points in March 2013, which was 0.99 points higher than in December of last year. This was found by the Citadele Bank and the SKDS market and public opinion centre via their Citadele Index research. In emphasising the importance of small businesses in Latvia’s economy, experts particularly note that for the first time since 2007, microenterprises have recovered cautious optimism.
This means that the value of the Citadele Index in this regard has risen above 50 points. When the index is above 50 points, that means that respondents are optimistic, while when it is below 50 points, they are pessimistic.
There are key differences in the views of Latvian businesspeople about their present and future – the present index, which speaks to what businesspeople think about changes over the past six months, has sunk below 50 points to 49.17 points, while the future index, which speaks to anticipations for the next six months, is comparatively high at a level of 56.74 points. This shows that businesspeople expect their situation to improve over the next half-year.
“Economic growth in Latvia has slowed during the first months of this year, mostly because of a slowdown in the processing industries,” says the Citadele Bank’s chief economist, Zigurds Vaikulis. “This factor, as well as the seasonal nature of the mood of businesspeople, helps to explain why some sub-indices are below 50 points. Overall, the Citadele Index indicators are in line with a story about moderate growth.”
“The index reaches 50 points in all groups of companies that were studied, including microenterprises with revenues up to LVL 25,000 a year,” says SKDS director Arnis Kaktiņš. “The last time that we saw such a situation was in 2007. I must add that the index rose above the 50 point mark for microenterprises on the basis of optimism about the future, because the present index is at a level of 46.92 points, while the future index is far higher – 55.79 points.”
Experts say that because micro and small enterprises make up the largest share of overall enterprises in Latvia, the mood of such businesspeople is of key importance in terms of the economic situation.
SIA “Lursoft IT” board member Daiga Kiopa notes that 94.72% of all businesses in Latvia are small or micro companies, and only 5.28% are medium or large companies. She also points out that the number of microenterprises in Latvia’s regions has been on the rise since 2009, though the number in 2012 has not yet reached the level that existed in 1007. Microenterprises are particularly successful in Latvia’s regions, where a look at profits and losses shows that regional microbusinesses are earning a profit, while those in and around Rīga are suffering losses. An increase in the number of small companies can be seen throughout Latvia, and revenues in that group reached or even exceeded the 2007 level last year, this according to the Lursoft company.
“Even a new and small company can find an export niche,” says Baiba Laizāne, who runs the SIA “Tilly” sports apparel company and won the “Mama Business 2013” competition that was organised by the Citadele Bank and the magazine “Mans Mazais”. SIA “Tilly” currently employs five people and pays the micro tax, but the businesswoman says that next year she will no longer be a payer of that tax.
Laizāne says that she would be delighted to change her status right now, but existing laws say that that can only be done once a year, in December. She believes that it would be useful to amend the law so that taxpayer statuses can be changed all year long so as to facilitate the development of micro and small companies, determining how many times each company could do so. Experts and the businesswoman agree that right now it would not be good to raise the rate on the tax which is paid by microenterprises.
The Citadele Index
The Citadele Index describes the subjective views of Latvian entrepreneurs about the economic situation in the country, also asking them to make forecasts for the next six months in area such as overall economic activity in the country and in the relevant business sector. The Citadele Index is based on a survey of 750 companies’ directors in Latvia who represent firms of different sizes and in various sectors. SKDS conducts the survey once every quarter. The last one was conducted in March 2013.
About Citadele Bank
Citadele is a local Latvian bank, which offers banking, financial and asset management services. Citadele group is represented in the Latvian market as well as in 9 other countries. Citadele Bank is the only collaboration partner of American Express® in Latvia and Lithuania who is entitled to issue American Express credit cards. In 2012 the bank was recognized as the best governed state-owned enterprise in the Baltic States according to a study conducted by the Baltic Institute of Corporate Governance. Citadele’s vision is to become the most valuable local financial group in the Baltic States. 75% minus one Citadele Bank’s shares are possessed by the State Joint Stock Company Privatization agency on behalf of the Latvian State and the owner of 25% plus one share is the European Bank for Reconstruction and Development (EBRD).