Citadele Index: Businesspeople Optimistic About Investments in Companies, Pessimistic About Overall Economic Activities in Latvia
Managers of small and large companies are optimistic about investments in their companies, but in all groups of companies, the most pessimistic views are about the overall level of economic activities in Latvia, the latest Citadele Index study show.
Managers of large companies say that they will have the necessary investments for their companies, and that is indicated by the optimistic rating of 64.31 points in the index. Managers of microenterprises (51.49 points), small companies (53.35 points) and medium-sized companies (53.36) also say that they will receive future investments that they need.
“This is good news in that companies are investing in their operations and plan to continue to do so in future,” says the director of the SKDS market and public opinion research centre, Arnis Kaktiņš. “That may be because of the availability of European Union funds and loans. If the views of businesspeople about overall economic activity in this country could be influenced by mass media information, then more objective indicators include the profitability and financial condition of companies, about which representatives of small and medium companies are pessimistic. Managers of large companies are optimistic in this area. It is also true that an important issue for large companies is the ability to find employees.”
Managers of small companies lack stability
“The situation in various countries in the world is very different,” says Citadele economist Zigurds Vaikulis, who is director of the Portfolio Management Division at CBL Asset Management. “In Japan, like in our country, managers of large companies have traditionally been most optimistic, while small companies are happier about life in Germany in recent years. One explanations of this has to do with wither companies are focused on domestic or foreign markets. Large companies are more likely to export products, while small companies focus on domestic demand. Exporters in Germany have felt upheaval in the European Union or Eastern markets more harshly, while small companies have made more successful use of the relative stability of domestic consumption in their country.”
The executive director of the Baltic Vegetables co-operative, Jānis Bušs: “Vegetable growers depend on various factors in the environment and the market. If, for instance, there is an overproduction of tomatoes elsewhere in Europe, then that means harsher competition. Our co-operative involves various vegetable farmers, and our output allows us to be sure that we will be able to insist on our prices at supermarkets and plan specific turnover in future so that we feel more comfortable. Even if some of us face complicated situations such as harvesting more cabbage than we can sell, then we can ask another member of the co-operative to produce sauerkraut from the cabbage that can be sold later. Owners of small farms, in turn, only count on the present day in terms of whether the buyer will come to the market or stay home because it’s raining outside. Accordingly, the views of small company owners about the future may be less hopeful.”
Blue Shock Bike manufactures electronic bicycles in Liepāja, focusing particularly on industrial needs – electric bikes for postal carriers or police officers, for instance. The company plans to increase its output to 3,000 bikes a year over the next three years, because even though this culture has not yet been developed very much in Latvia, Baltic Shock Bike development director Neils Kalniņš believes that this is a good export product. “Pessimism among small businesses in Latvia, mostly ones that have been launched recently, is because of the comparative lack of resources from various funds. At Blue Shock Bike, for instance, we have invested enormous work to reach our sales results, as well as the trust of our clients and partners. Not all new entrants in the market could do that given existing economic circumstances.”
The grain product company SIA MILZU! established a plant in the Kuldīga District last year, and during the subsequent period of time, it has managed to provide its market to large sales networks, taking up 10% of the market. Company director Enno Ence: “We only have eight employees at our company, and that offers advantages such as mobility, flexibility and the ability to take decisions more quickly. My experience tells me that small businesses have a more precise understanding of the subjective mood, and the mood can shift from the feeling that everything is failing to the idea that things are becoming better. Such emotional uplift is truly satisfying. It is best to maintain cautious optimism. Excessive hopes may not prove to be possible, thus creating the aforementioned sense of pessimism.”
Cautious optimism about future
During the last four quarters (since September 2014), the Citadele Index ratings that reflect the mood of businesspeople have not changed much – 48 to 49 points. This indicates that the mood of businesspeople largely remains pessimistic. The latest rating in the Citadele Index, which focuses on the 2nd quarter of 2015, is 48.15 points.
The value of the Citadele Index present day index indicates that businesspeople feel that the situation has worsened during the past six months. It must be noted that during the last year, the views of businesspeople about the previous half-year has always been more pessimistic, improving only slightly during the last quarter. The value of the present day index is 46.08 points, while the value of the future index is 50.21, which suggests that businesspeople are very cautiously optimistic about the next six months. Still, the overall value of the future index has dropped by 2.09 points during the last quarter.
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