Citadele Bank

Citadele Index: Businesspeople Pessimistic, See Solution in Lower Labour Taxes, Development of Manufacturing

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For the second quarter in a row, the mood of Latvian businesspeople continues to be more pessimistic than optimistic, though during the last quarter it has improved just a little bit, the latest Citadele Index study has found. Businesspeople think that the most effective way of promoting rapid economic development is to lower labour taxes and to develop manufacturing.

As usual, the mood of exporting businesspeople was far more optimistic than that of businesspeople who export nothing, but during Q4 of 2014, the mood seriously deteriorated among exporters, becoming more pessimistic and drawing closer to the mood of non-exporters. Non-exporters are even a bit more optimistic about the future than exporters are.

“Representatives of all sectors, including manufacturing, retailing, construction and services, are more pessimistic than optimistic,” says the director of the SKDS market and public opinion research centre, Arnis Kaktiņš. “If we look at the level of the Citadele Index in terms of various groups of businesspeople, then we find that in December 2014, cautious optimism could only be seen among large companies and companies with foreign capital.”

Businesspeople believe that the most effective way for the government to facilitate rapid economic development or a leap forward in Latvia would be to reduce labour taxes (71% of respondents), to develop manufacturing (61%), to offer support for companies so that they can offer products and services at a higher level of added value (46%), and to support exports (37%).

All in all, 4% of businesspeople said that 2014 was much better than 2013, 32% said it was a little bit better, 22% said that it was a bit worse, 7% said that it was much worse, and 35% said that it was the same. 35% expect 2015 to be the same as 2014, 31% think that it will be a bit better, and 13% believe that it will be a bit worse.

Among the main challenges in 2015, respondents speak to attracting new clients or finding new markets (64%), ensuring the “survival” of the relevant company (38%), designing and introducing new products or services (36%), increasing labour output (29%), and retaining employees (29%).

“Last year was full of challenges for the business environment, and so many companies had to think hard about increasing effectiveness and finding new markets,” says Guntis Mincis, a senior client transaction director at the Citadele SME Services Division. “Exporters are thinking about how to increase export volumes, while those who are not engaging in exports and planning to do so. The availability of loan resources will be of essential importance in this regard. The Citadele Index shows that 20% of exporting companies plan to seek bank loans during the next six months. Data from Citadele, in turn, show that businesspeople are using types of financing that have been less popular up to now so as to enhance exports – factoring, as well as trade financing instruments.”

The board chairman of AS Rīgas Piena Kombināts (Food Union Group), Normunds Staņēvičs: “Despite an unfavourable situation in the global dairy market, Russia’s embargo against dairy product imports, and the declining value of the rouble, 2014 was a fairly successful year for Food Union. We’ve increased revenues, become the largest food and beverage company in Latvia, entered eight new markets, and become optimistic about entering the Chinese market in 2015. Overall market moods and lots of challenges for the milk sector this year, however, encourage us to mobilise ourselves and be more cautious in predicting major growth. Events last year showed how important dynamics and flexibility are in terms of a company’s ability to deal with unexpected change and to take rapid and successful steps forward.”

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