Citadele Bank (Latvia)

Citadele Index: Kurzeme’s Business Owners the Most Optimistic, Latgale’s - the Least

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Mārtiņš Āboliņš, Citadele Bank Economist

The slowing speed of Latvia’s economic growth hasn’t reduced the optimism of business owners, which has remained positive for more than two years. However, business owners rate the general economic activity in the country and in their industry more cautiously, according to the latest Citadele Index survey by Citadele Bank and SKDS.

The Citadele Index survey of business owners’ moods conducted in the first quarter of this year shows that the mood of Latvian employers has been stable and positive for more than two years, with the mood index reaching 51.48 points. 

Business owners from Latgale are sliding deeper into pessimism, and their mood is significantly more negative than those operating in other regions of Latvia, while the most optimistic are the business owners from Kurzeme. The mood index of Latgale business owners is 46.40, while in Kurzeme it is 53.21. The mood index of business owners in Riga is 51.58 points, 51.97 in Zemgale, 52.03 in Greater Riga, and 52.59 points in Vidzeme, according to Citadele Index results from the first quarter of this year.

The reduced pace of economic growth has not affected business owners’ mood, but they have started rating the economic situation in the country and their industry more cautiously. Both of these indicators for the first quarter of this year are below the optimism or 50-point mark: the general economic activity index for the country as a whole is 48.57 points, and economic activity in business owners’ respective industries has been rated at 49.90 points.

Exporters have become more cautious

Mārtiņš Āboliņš, Citadele Bank Economist: “Moderate but stable optimism - this currently describes the mood of business owners in the past few years. The evaluation of the current general economic situation has probably worsened under the influence of external factors. A slowing down of the global economy and international trade wars also effect the growth of the Baltic states. We see that Latvian exporters’ optimism has decreased over the past two quarters. If, before now, exporting businesses were much more optimistic than those operating in the local market, then currently, with growth in the global economy slowing down, exporters’ optimism has dropped to a level similar to the non-exporter level. Exporters’ optimism is currently the most cautious since 2016.”

Āboliņš adds that exporters’ cautious mood, as well as locally-operating business’ caution regarding the general economic situation in the country, confirms predictions that Latvia’s economic growth this year will be slower than last year.

Exporting business owners’ optimism has decreased in the past six months by almost three points, dropping to 52.19 points in the first quarter of this year, coming closer to the index of non-exporting businesses (51.15 points).

Construction: the most optimistic; service providers: the most cautious

The Citadele Index survey shows that the largest fluctuations have long been seen in the mood of construction business owners - for years now, periods of complete pessimism have mingled with flares of optimism.

Mārtiņš Āboliņš: “Since the index has been measured, construction business owners have been either the most optimistic or the most pessimistic industry in 47 out of 61 quarters. This clearly illustrates how fickle the construction industry is.”

Currently, construction business owners are once again the most positive industry, and their optimism has reached a level not often seen in the post economic crisis period: 54.22 points. In this quarter, the optimism of retail and manufacturing business owners has also risen, while the service industry has turned from the most optimistic to most cautious over the course of three quarters. The mood index of retail businesses is 52.94 points, for manufacturing - 52.67, while in the service industry it is 50.34 points.

About Citadele Index

Citadele Index is a survey conducted by Citadele Bank since 2004, which surveys 750 business owners and leaders. The survey and data summary is conducted by market and public opinion research company SKDS. The survey includes the opinions of manufacturers, retailers, service providers and those in the construction industry from the whole of Latvia. The latest survey was done in March 2019.

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