Citadele Bank

The most positive-minded in Latvia - the manufacturers, in Lithuania - the builders

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For the first time, Citadele Index study outlines the differences in the view of Latvian and Lithuanian entrepreneurs on the business environment. According to the latest study the total mood index of Latvian entrepreneurs does not yet reach the optimism threshold (50 points) - it is 49.45 points. Meanwhile, the Lithuanian businesses are more optimistic - the index exceeds the critical 50 point mark and is 51.15 points.

Citadele Index study serves as an indicator for economic forecasts. The data is obtained by surveying 750 business owners and top managers in each country. In Latvia the Citadele Index study has been carried out since 2004 and this year a survey based on identical methodology was carried out also in Lithuania.

Different mood in different business sectors. The mood of Latvian builders has been pessimistic since the mid-2014 (it has seen slight improvement over the last quarter, but it is still pessimistic as shown by the index value (48.69 points), while in Lithuania the builders are a little more optimistic (index value: 54.69 points). In Latvia, the manufacturers have regained their optimism (50.15), their mood in the last quarters - similarly as the entrepreneurs in other ares - was still in the pessimistic zone. Meanwhile, Lithuanian manufacturers are more pessimistic than their Latvian counterparts (49.71 points). While service providers in Lithuania are optimistic (52.06 points) and in Latvia - almost optimistic (49.98 points), the worst mood was found among companies in the trde sector - both in Lithuania (48.85 points) and Latvia (46.83 points). In Latvia the mood of the traders has gone down during the last quarter.

“The economic growth rates in Lithuania and Latvia in the past few years have been quite similar, but the results of our survey present differences in the mood of the entrepeneurs. The main mood differences can be found in the construction industry, where Latvian entrepreneurs are significantly more pessimistic than their Lithuanian colleagues, even though during the last few quarters the construction volumes have dropped both in Latvia and Lithuania. The significantly more optimistic mood of the Lithuanian builders is most likely to be explained by more robust demand in the private sector and fast acquisition of the EU funds compared to Latvia,” the economist of Citadele bank Mārtiņš Āboliņš explains.

Lithuanian entrepreneurs – the biggest optimists. The mood of the managers of the smallest Latvian companies employing up to 9 people has improved during the last quarter (49.16 points), while the mood of the managers large companies has deteriorated (companies with more than 250 employees, 50.99 points); their mood has worsened for several quarters in a row. Despite this trend, the large companies in Latvia have the most optimistic view of the current situation and the future. In Lithuania the best mood - an in this case, significantly better than in Latvia - is also found in managers of large companies (58.57 points).

Rural entrepreneurs in Latvia feel better than Lithuanian counterparts. The most optimistic Latvian entrepreneurs are found in Riga region (51.60 points) and Vidzeme (50.95 points). While in Lithuania the best mood is found in Vilnius (53.95 points). In comparison - the view on the present and the future of companies in Riga is less positive and hopeful - 49.66 points. In Kurzeme and Zemgale the companies are rather pessimistic (48.88 and 48.41 points, accordingly), and the most pessimistic - in Latgale (45.14 points).

“A significantly worse mood has been found in Latgale for several years now and is nothing new, but this year Latvian entrepreneurs working outside the cities are showing a positive trend; the mood in the rural areas has significantly grown during the last quarter and can viewed as optimistic. And Latvian rural entrepreneurs are feeling more positive than rural entrepreneurs in Lithuania,” the manager of the market and public opinion study center SKDS Arnis Kaktiņš.

Companies will continue to recruit new employees. Both Latvian and Lithuanian companies generally are pessimistic about the overall economic activity in the country. But the fundamental difference between Latvian and Lithuanian entrepreneurs is the prospected changes in the company turnover, Lithuanian companies are more optimistic, while Latvians are sill generally pessimistic. At the same time, entrepreneurs in both countries more often admitted that they will recruit new employees during the next six months.

“The aim of Latvian economic growth in a medium term is to achieve a balanced 5% growth in gross domestic product every year,” stresses the Deputy State Secretary of the Ministry of Economics Raimonds Aleksejenko. “In order to achieve that a sustainable and long-terms growth model is required, based on balanced growth; re-allocation of internal resources for development industries with a higher added value and good use of resources of the EU funds; good business environment to attract foreign capital; as well as export promotion by participating in global value chains with higher added value and development of high quality products. It is also nescessary to create and develop new competitive advantages, based on technological factors, production efficiency, innovation. And these are the lines of action that we are working on,” Mr. Aleksejenko continues.

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