The newest Citadele Index survey shows - business owners have begun to regain their optimism, although the index’s 50 point boundary, which shows an optimistic mood, has yet to be reached. In the last quarter, the most optimistic are manufacturers (47.3 points). Experts explain this as the overcoming of fears which appeared last year after Brexit and Donald Trump’s election to the White House.
The research suggests that among Latvian business owners there is still a critical mood - the Citadele Index value is 46.40 points. However, the mood has improved by almost one point when compared with the previous quarter. Among the different fields, the biggest growth in optimism can be seen in manufacturing (+2.2%), reaching 47.3%. The second least critical field is service providers (46.8%). In other fields, business owners have a more critical mood.
The most positive are still big business leaders (56.8%) with 250 or more employees. Their mood also shows the highest growth in optimism (+4.3%).
In a press conference, Citadele Bank economist Mārtiņš Āboliņš explained the business owners’ change in mood through last year’s potentially over-emotional reaction to Brexit and the results of the US presidential elections. “Both elections had wide repercussions. Their results brought much uncertainty about further business opportunities in Great Britain and the US, which probably brought about unrest. However, each new day has brought new clarity allowing business owners to continue their work. Most likely, business owners have become more cautious in their future plans and are also looking for ways to minimise the risks associated with, for example, currency fluctuations. However, we see that the general situation is improving,” evaluates Mārtiņš Āboliņš.
Citadele Bank Head of Corporate Banking Sanita Bajāre recognises that businesses’ need for loans, which shrank at the end of 2016, is growing once again. “Despite the fall which we observed in business loans in the second half of last year, the total portfolio of loans issues to businesses last year increased by 6% overall compared to 2015. We are also currently seeing an important interest in loans by business owners. This is a testament to a stable enough feeling for business owners to invest in development and growth,” says Sanita Bajāre. Business owners’ deliberative, realistic, quality business projects are also giving positive signals to banks, gaining more trust and support from the bank.
Owner and designer of luxury children’s clothing brand “Lazy Francis” Olga Krūze, who under six months ago opened a new children’s clothing shop in a smart area of London and who had previously begun working with buyers in the USA, didn’t hide the fact during the press conference that she had sensed both positive and negative experiences from Brexit and Donald Trump’s election as president of the United States. “In the case of the USA, uncertainty surrounding the continuing politics of the country, including import duties and tax issues, has resulted in buyers worrying about lack of stability. American buyers are open - I really like your products, but I’m scared to sign a contract, because I don’t know if there will be sudden new restrictions on imports or taxes, significantly increasing the price of the product and making it unsellable,” explains Olga Krūze of the reason her successful business was interrupted in the USA. Meanwhile Brexit has been beneficial while also causing losses: “At the time of Brexit, I was looking for premises for a “Lazy Francis” shop in London. Huge worry and instability reigned, as a result of which the landlord was willing to sign a contract with a significantly lower deposit. That was a significant gain for me. However, fluctuations in the value of the British Pound happened at the same time, and this made me lose around 4000 Euro. It was a huge blow, but I didn’t stop my work and I am doing everything I can to protect myself from these kinds of situations in the future.”
Chairman of the board for drone and router manufacturers “HansaMatrix” Ilmārs Osmanis feels that business owners should think more about their business development and the real, immediate things that can affect it rather than far-off political processes in the United States or Great Britain. “I am truly worried by the lack of a qualified workforce and young people’s low interest in passing exams in the sciences. If there aren’t people who can work, there will never be business in Latvia. At the moment we are getting by, but if a political decision isn’t made to give the sciences a more fundamental role in schools, we will have no other option than to move our business to China where there is no shortage of young people interested in Chemistry, Physics, and Mathematics,” says Ilmārs Osmanis describing the risks which worry HansaMatrix. Meanwhile he doesn’t see the possible difficulties for business which could be linked to political processes in the US and Great Britain: “The US needs our output. They have large consumption and needs but weak opportunities to manufacture it themselves. If they put any tax burdens on Europe, China or any other region which provides them with the necessary amount of high technology, they will suffer. I doubt it will happen.”
Citadele Index is research which Citadele has been undertaking in Latvia since 2004. Each quarter 750 business owners and leaders are questioned, thereby providing a trustworthy, first source look into the economic state of the country, field and business and a prognosis for the next six months. The survey and data summary is provided by SKDS.