Swedbank Analysis

Swedbank Analysis May 19, 2011

Economic Research Department. Swedbank AB (publ). www.swedbank.lv Lija Strašuna +371 6 744 5875, Mārtiņš Kazāks +371 6 744 5859, Dainis Stikuts +371 6 744 5844

Legally responsible publisher: Cecilia Hermansson, Group Chief Economist, +46 8 5859 7720

Recent manufacturing trends in Latvia – are there reasons to worry? • After a swift rebound in manufacturing in the first half of 2010, output growth

has stalled, and there was even a decline in late 2010. The developments in manufacturing sectors in the other parts of the Baltic Sea region were more favourable. Are there reasons to worry?

• Partly, the manufacturing slowdown is explained by a slowdown in the re-source- and capacity- limited wood industry. Another factor is the existing production capacity constraints in other sectors – investments in production facilities have been feeble so far. With investment growth picking up as delev-eraging becomes less acute and the continuing favourable external environ-ment, manufacturing and export expansion will continue. However, growth rates will decelerate.

• Despite many improvements in the investment and business environment, there are still many opportunities for economic policy that can and should be taken to accelerate investments and manufacturing expansion, thereby sup-porting export-driven economic growth.

Is the fallback in manufacturing temporary? After rapid recovery in the first half of 2010, manufacturing output growth lost momentum later in the year, and, around the turn of the year, output even declined for three consecutive months. Moreover, industrial confi-dence has been stagnating since May 2010. There was an increase in Latvian manufacturing in February and March and output returned to the average level of the second half of last year; however, it could not com-pensate for the whole fall of the three previous months. The pre-crisis volumes have not been reached so far.

Stagnating confidence and a fallback in manu-facturing output.

Manufacturing output, sa

40

60

80

100

120

Jan.07 Jan.08 Jan.09 Jan.10 Jan.11-50

-25

0

25

50

Annual growth (rs)

Index, 2005=100

Confidence, pts (rs)

Source: CSBL, Eurostat

During the same time, manufacturing output and confidence develop-ments in the other parts of the Baltic Sea region were much more en-couraging.1

Manufacturing output, 2007=100

60

70

80

90

100

110

120

Jan.07 Jan.08 Jan.09 Jan.10 Jan.11

Denmark

Euro area

Estonia

Latvia

Lithuania

Poland

Sweden

United Kingdom

Source: Eurostat

Manufacturing output, 2007=100 (sa, 3M average)

Manufacturing confidence, pts (sa, 3M average)

-50

-40

-30

-20

-10

0

10

20

30


Denmark

Euro area

Estonia

Latvia

Lithuania

Poland

Sweden

United Kingdom

Source: Eurostat

More favourable manu-facturing developments in neighbouring coun-tries.

Deceleration in the growth of manufacturing volumes in Latvia was ex-pected (see our July 2010 monthly newsletter2). However, the fact that Latvian developments of confidence and output are falling behind those of our main trading partners and competitors is disappointing. As manu-facturing is one of the largest exporting sectors, such a tendency puts at risk further export volume growth. Is the fallback temporary, what are the

1 Manufacturing output developments do not necessarily follow confidence developments closely. For instance, in Poland output was growing faster than confidence, while in the UK it was the other way around. 2 Swedbank Montlhy Newsletter (2010), Latvian Economy, „Manufacturing in Latvia – are the current growth rates sustainable?”, July 2010

2 Swedbank Analysis • May 19, 2011

reasons behind it, and what might and should be done to accelerate growth?

What is behind the slowdown in confidence? Confidence in manufacturing has been stagnating due to production ex-pectations and an assessment of order-book levels. There seems to have been a minor increase in production expectations in a couple of recent months, but, as the assessment of order-book levels has not improved, this small increase is hardly noticeable in the total confidence indicator (see above). It should be noted that production expectations are positive, implying growth in output, but manufacturers do not expect growth to ac-celerate.

Industrial confidence not improving…

Employment expectations also became positive, suggesting that there are more companies planning to hire new employees than those planning to fire existing ones. Selling-price expectations have risen, owing to global commodity price growth in the second half of 2010.

Manufacturing confidence, pts (sa)

-75

-50

-25

0

25

50

Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11

Assessment of stocks offinished products

Assessment of order-booklevels

Production expectat ionsfor the months ahead

Selling price expectationsfor the months ahead

Employment expectationsfor the months ahead

Source: DG ECFIN

However, the situation differs across industries. For instance, production expectations can be used as a leading indicator to forecast production volumes, although volatility of this confidence indicator should be taken into consideration.

Production expectations for the months ahead,

-50

-25

0

25

50


Food products

Wood products

Machinery & equipm.

Computer, electronicprod.Metal products

Total manufacturing

Source: DG ECFIN

Production expectations for the months ahead, pts (sa, 3M average)

The expected slowdown in the wood industry was quite evident last year, and, although there has been a rebound early this year, it is likely to be one-off, as production expectations have decreased again in April (see below for more detailed analysis). Wood industry constitutes nearly one-fourth of total manufacturing output thus significantly influencing total fig-ures. Production expectations in food manufacturing have been quite stable for a year now. At the same time, production expectations in metal-

…but some industries are performing better than others.

Swedbank Analysis • May 19, 2011 3

and machinery-related sectors3 continue to increase (mostly owing to ex-port expectations).

Is demand growing? During the last two years, manufacturing has grown, owing to a recovery in export markets: the share of exported production in manufacturing turnover increased from 51% in 2008 to 64% in the first quarter of 2011.

Share of exported pro-duction has risen…

Manufacturing turnover (sa), 2005=100

80

100

120

140

160

180

Jan.05 Jan.06 Jan.07 Jan.08 Jan.09 Jan.10 Jan.11

Locally soldproduction

Exported production

Source: CSBL

The recovery in domestic demand has started, thereby supporting pro-duction for local use; however, this is much slower and expected to re-main so in the near future.

The external environment is also expected to remain favourable in the coming years, especially so as our main trading partners are forecast to grow faster than Europe on average. Moreover, growing global prices, although raising imported input costs, are helping Latvian exporters to in-crease their turnover thus easing deleveraging pressures.

… and external environ-ment remains favourable.

Economic growth of main trading partners, %

2010 2011f 2012fExports to this

country, % of total exports (2010)

Lithuania 1.3 4.2 4.7 16.3Estonia 3.1 4.5 4.5 13.2

Germany 3.6 2.4 1.9 8.7Russia 4.0 4.6 4.5 10.7

Sweden 5.3 4.0 2.6 6.3Poland 3.8 3.9* 4.2* 5.0

Denmark 2.1 1.9* 1.8* 3.9United Kingdom 1.4 1.5 2.0 3.6

Euro area 1.7 1.5 1.5 21.5**

* Eurostat forecasts** Without Estonia

Source: CSBL, Eurostat, Swedbank forecasts (April 2011)

3 Basic metals, metal products, computers and electronic products, electrical equipment, other machinery and equipment, and transport (including motor vehicles and their acces-sories).


What are the factors limiting production? Capacity constraints are becoming more and more important for manu-facturers, implying slowing growth rates of production volumes. Among the factors limiting production, demand and financing are becoming less binding, while the role of equipment and labour constraints are increas-ing.

Factors limiting production in manufacturing, % (sa)

30

40

50

60

Demand

Labour

Equipment

Other20 Fina

0

10

1Q 04 1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 1Q 10 1Q 11

ncial

in manufacturing is moving towards pre-crisis levels, in some sectors (such as wood, wearing apparel, and basic metals) it has already reached or even exceeded the 2005-2007 average levels. This implies the necessity of investments.

Source: Eurostat

The situation certainly differs across industries – while average capacity utilisation

Capacity utilization, %average 2005-2007

45

60

75

90

Metals

Food products

Wood products

Electrical equipm.

Metal products

Wearing apparel

Total manufacturing

301Q 07 1Q 08 1Q 09 1Q 10 1Q 11 1Q 12 Source: DG ECFIN

At the same time, the manufacturing sector was the one seeing the largest gains in competitveness. Assuming that in 2005, i.e., before the boom, the situation was about balanced, the gap between productivity and wage levels was eliminated in late 2009. Moreover, productivity per full-time equivalent employed grew more rapidly than real wages last two years. Unit labour costs also continued to decline throughout 2010. This suggests that Latvian producers have restored their competiteveness sufficiently to be able to benefit from the rise in external demand.

Equipment and labour constraints increasing.

Capacity utilisation in some industries exceeded pre-crisis levels.

Manufacturing has seen the largest gains in com-petitiveness.


Competitiveness indicators in manufacturing, 2005=100 (sa)

140

160

170

200

80

100

120

1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 1Q 1080

110

140

Unit labour costs (rs)

Real gross wage

Productivity per FTE*

Source: CSBL, Swedbank estimations

*FTE - employment in full-t ime equivalents

Why have investments been slow to respond so far? In our July 2010 monthly newsletter, we already pointed out the necessity of investments in production facilities to sustain manufacturing growth rates. However, even though the trough in nonfinancial investments

gn vestment (FDI) is a bit more encouraging.

seems to have been reached in the second quarter of 2010, investment activity so far has been quite feeble. The picture with respect to foreidirect in

Non-financial investments in manufacturing,

100

120

140

15

20

25

0

20

40

60

80

1Q 08 1Q 09 1Q 100

5

10

Other fixed assets

Machinery & equipment

Buildings

Long-term intang.assets

% of total investments(rs)

Nonfinancial investments in manufacturing, LVL m

Source: CSBL

Feeble investment activ-ity so far.

FDI inflows in manufacturing

-20

-10

0

10

20

30

40

50

1Q 04 1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 1Q 10-10

-5

0

5

10

15

20

25

LVL m

% from valueadded (rs)

Source: Bank of Latvia, CSBL


Companies’ cash flows have improved and profit margins have risen, es-pecially in manufacturing, where they are on average higher than in the economy and have already reached the 2006-2007 levels.4 However, the situation differs a lot across industries. For instance, evidence suggests that last year was exceptionally good for wood manufacturers (although currently profit margins are decreasing due to rising input prices), while for many companies in metal- and machinery-related sectors profitability is still way below pre-crisis levels. At the same time, manufacturers, hav-ing raised turnovers, are now taking the time to shape up their balance sheets (many of them are still in the loan restructuring process) before assuming new liabilities.

Better cash flows and profitability of busi-nesses, but deleveraging still ongoing.

Investments in produc-tion facilities to pick up.

Credit stock in manufacturing

0

20

40

60

80

1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 1Q 100

300

600

900

1200

100 1500

% of valueadded

LVLm (rs)

Source: FCMC, CSBL

As a result, companies’ retained earnings so far seem to have increased deposits more than investments. This can also be justified by the uncer-tainty regarding global developments and pre/post-election fiscal policy. It should be taken into account that developments in investments and de-posits late last year were also influenced by seasonal factors.

Deposits of resident non-financial institutions, bn LVL

0.9

1.2

1.5

1.8

up by LVL 255m or 36% yoy in 4Q 2010

Other

0.0

0.3

0.6

Jan.06 Jan.07 Jan.08 Jan.09 Jan.10 Jan.11

Overnight

Source: Bank of Latvia

Will investment activity increase? Investments in manufacturing are expected to pick up. Companies need to increase their capacity to continue raising production volumes. This implies investments in production facilities. Investments to reduce labour and energy intensity are anticipated – for instance, increasing energy tar-iffs are compelling companies to invest in energy effectiveness. In 2010, issued building permits for production buildings and warehouses rose

4 Bank of Latvia (2011), http://www.makroekonomika.lv/dazu-nozaru-pelnitspeja-atgriezas-straujas-izaugsmes-gadu-limeni (in Latvian).


http://www.makroekonomika.lv/dazu-nozaru-pelnitspeja-atgriezas-straujas-izaugsmes-gadu-limeni

http://www.makroekonomika.lv/dazu-nozaru-pelnitspeja-atgriezas-straujas-izaugsmes-gadu-limeni

significantly, while, for all other types of buildings (residential and non-residential), permits seem to have bottomed out after an extensive drop.

Number of issued building permits

0

20

40

60

80

100

120

Office buildings

Wholesale and retailtrade buildings

Production buildingsand warehouses

Source: CSB1Q 06 1Q 07 1Q 08 1Q 09 1Q 10 1Q 11 L

Investments in new product development and diversification (including education and training of employees) are also essential. Taking into ac-count the current relatively unsophisticated product mix of Lativan manu-facturers,5 there is still a substantial potential for manufacturing sector to move up the value-added chain. Producing “smarter” goods would dimin-ish dependency on price movements and the cheap (so far!) labour force, but would generate higher turnovers. There is also the possibility of pro-viding additional services to customers in relation to the produced goods, thereby strengthening client loyalty.

Moving up the value-added chain is crucial.

Share of high-tech exports, % of total

0

4

8

12

16

20

2002 2003 2004 2005 2006 2007 2008

Latvia

EU27

Estonia

Lithuania

Source: CSBL

Currently, Latvia lags behind Lithuania and Estonia in export sophistica-tion, as well as in innovations and research and development. The link between research institutes and business is quite weak, resulting in a low number of patents. Research projects (and received grants) satisfy aca-demic interests and very rarely follow business requests. At the same time, most manufacturing companies are too small to create their own re-search centres. In order to develop new, more sophisticated products, investments in research and development are necessary.

velopment is needed. More research and de-

5 See Beņkovskis, K., R. Rimgailaite (2010), „The quality and variety of exports from new EU member states: evidence from very disaggregated data”. Working Paper 2/2010, Bank of Latvia. Also Vītola, K, G. Dāvidsons (2008), “Structural transformation of ex-ports in a product space model”, Working Paper 4/2008, Bank of Latvia.


Share of enterprises with innovation activities in

15

28

0

20

40

60

80D

EB

E

FR IE DK

EE FI AU

SE

UK

NL

EU27 NO PO

GR IT ES

CZ

LV ('

08)

LT BG PL

RO HU LV

Source: Eurostat, CSBL* Eurostat data available for 2006 only, CSBL provides data about LV also for 2008

Share of enterprises with innovation activities in manufacturing, 2006*

R&D expenditure of business enterprises, 2009 (% of GDP)

0.5

1.0

1.5

2.0

2.5

0.140.0

FI SE

US

('08

)D

KD

E ('

08)

IS ('

08)

EA ('

08)

FR ('

08)

SI

EU27 IE UK

PT

('08) NO CZ

ES ('

08)

IT ('

08)

EE HU

HR

MT

TR RU PL LT SK LV RO

BG ('

08)

CY

('08

)Source: Eurostat

Financing of investments is becoming more available. This can be seen in confidence survey data (see above), close-to-zero or even negative real interest rates6 (however, the forecast rise in EURIBOR will raise these). Banks are becoming more active in new lending, and the first pri-ority is exporting companies. With higher Latvian sovereign credit ratings, foreign investors are also expected to become more active.

EUR interest rates, %

-15

-10

-5

0

5

10

15

Jan.06 Jan.07 Jan.08 Jan.09 Jan.10 Jan.11

Weighted average fornew loans (nominal)

Weighted average fornew loans (CPI deflated)

Nonfin. corporates,existing stock (PPIdeflated)

Nonfin. corporates,existing stock (nominal)

Source: CSBL, Bank of Latvia

6 Regarding interest rates for new loans, separate data are not available for households and businesses, just a weighted average – that is why they are deflated with the consumer price index (CPI). Interest rate data for existing credit stock are available for nonfinancial institutions, but not for different industries – the producer price index (PPI) is used for deflating, as it might better reflect the cost situation for businesses than CPI. Deflated by the CPI, interest rates for existing stock of nonfinancial corporations still nearly ap-proached zero in early 2011.

Financing availability improves gradually.


Will a change in industry structure support growth? In the second half of last year, the output growth of wood manufacturing slowed noticeably. As it is the second-largest industry, the growth of other sectors did not manage to compensate for this slowdown, which was also reflected in total manufacturing figures (see above). In the first quarter of this year there was a sudden pickup in wood manufacturing; however, it is seen to be more a one-off effect rather than a return of the previous steep trend.

Manufacturing output, 3M average, sa

25Jan.07 J

50

75

100

125

150

an.08 Jan.09 Jan.10 Jan.11

Food prod.

Metal prod.

Machinery & equipm.

Wood

Computer, electronics

Clothing

Nonmetallic minerals

Manufacturing output, 2007=100 (sa, 3M average)

Source: CSBL

ith prices rising, private forest owners are becoming more active and might compensate for a decline in supply from the public sec-tor; however, it is difficult to forecast these volumes. If Russia enters the WTO in 2012, as planned, current export duties on its timber will be low-ered, which might also improve somewhat the availability of resources for Latvian manufacturers. However, imported volumes are still likely to be very small. In order for the wood industry to grow further, product devel-opment and diversification are necessary, facilitating a shift to higher-value-added products.

Metal and machinery sectors (including equipment and transport) have picked up the baton from wood producers, as expected. These industries altogether constitute about one-fourth of total manufacturing turnover; however, it should be taken into account that many of them are quite small and some of them (like transport) are dependent on large orders from a few customers. The developments in these sectors are muchmore volatile than in, e.g., the relatively homogeneous wood sector, but,

companies have begun to experience a shortage of qualified labour.

Growth of wood manu-facturing has slowed…

… but the baton is being picked up by metal- and machinery-related sec-tors.

The slowdown in wood manufacturing growth was expected. The limiting factor in this industry is not only equipment, but also resource constraints, as logging volumes are not expected to grow. The state logging company Latvijas Meži, which provided about 70% of timber resources the last two years, plans to reduce its logging volumes by about one-third during 2011-2014. W

on the other hand, the greater diversification of metal- and machinery-related industries makes them less vulnerable to external shocks (espe-cially as the strongest companies survived the crisis). These sectors are anticipated to raise their share in the manufacturing structure in the com-ing years and increasingly to support growth. They have encountered fewer problems with capacity constraints so far, although some of the


Latvian manufacturing structure, %

23 19 17 17 19 20

14 16 18 14 13 12 11 13 13 14 14 16 14

10 12 11 10 10 8 8 9 9 9 9 9

23 23 26 26 25 23 26

28 28 28 31 34 33 31 30 29 27 26 26 26

0

20

1Q 08 1Q 09 1Q 10 1Q 11

10

40

60

80

100 Other

Machinery, equipm., transport

Basic metals, metal products

Rubber, plastics, minerals

Chemicals, pharmaceuticals

Paper, poligraphy

Wood, furniture

Textiles, clothing

Food, beverages

Source: CSBL

The largest sector, the food industry, stagnated last year due to its large exposure to domestic demand, even though its share of exported produc-tion rose somewhat. We expect domestic demand to recover slowly in the coming years, thus adding to food manufacturing growth; however, rising global food prices and, consequently, food product inflation in the Latvian market will undermine consumption growth.

Exports, % of total manufacturing turnover

10

20

30

40

50

60

70

80

90

1Q 08 1Q 09 1Q 10 1Q 11

Food products

Wood products

Metal products

Chemicals

Electrical equipm.

Nonmetallic minerals

Total manufacturing

Source: CSBL

An opportunity to support manufacturing growth by raising the value

Overall, we expect manufacturing growth to continue because of both ex-ternal demand developments and gradual recovery in domestic demand, Investments in production facilities will rise. The output growth rates will decline, however; we expect manufacturing growth to nearly halve this year compared with the 2010 rebound (15.3%), as global growth slows and while investments are made.

How is export and GDP growth affected? A structural change in the economy is slowly taking place – the shares of manufacturing and exports in GDP are rising. Owing to the recovery in manufacturing, goods exports (which account for over 70% of total ex-ports) have already exceeded pre-crisis levels in value terms. The econ-omy is becoming more balanced; however, this is an early stage of the restructuring process, which might take years to complete.

Food manufacturing growth will remain frag-ile.

Growth via widening

Total manufacturing growth is forecast to nearly halve this year.

Economy is becoming more balanced.

added of its production is through the strengthening of clusters, i.e., an integration of several upstream and downstream subsectors. For in-stance, renewable/ bioenergy and wood industries and energy sectors at large could be incorporated, while links with other regions inside Latvia and also across the Baltic Sea Region could be estab-lished/strengthened.

clusters is possible.


Considering that Latvia’s export base is smaller than those of Estonia and Lithuania, Latvian manufacturing and exports need to grow faster to at-tain the GDP growth rates of those countries. So far, this has not been the case, which is one of the reasons why the economic recoveries in the neighbouring countries have been more rapid.

Manufacturing and exports in Baltics (current prices)

0

4

1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 1Q 100

300

8 600

12

16

20

900

1200

1500

LV goods' exports,LVL m (rs)

LV manufacturing,% of total GDP

EE manufacturing, total GDP% of

LT manufacturing,% of total GDP

Source: CSBL, Eurostat

The smaller manufacturing base in Latvia also makes it more difficult for the existing companies to expand and enjoy economies of scale. The

xports of electronic prod-ucts.

business side has already done a lot to improve the competitiveness and effectiveness of production, and to find new markets. However, it will be very difficult to raise overall manufacturing volumes significantly and fast without attracting new players to the market. A positive example can be found in Estonia, where the reopening of the Ericson plant last autumn7 immediately boosted the manufacturing and e

Share of exports in GDP (current prices), %

0

10

20

30

40

50

60

70

80

90

Estonia

Latvia

Lithuania

1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 1Q 10 Source: CSBL

How to accelerate growth? To conclude, the very recent slowdown in manufacturing is explained by two main factors. First, the slowdown of resource and production capacity constrained wood industry, which was the first and the strongest driver starting to pull the Latvian economy out of the recession. Further sustain-able growth in this industry is by and large possible only by moving up the value added chain. Second, existing capacity constraints are hindering other manufacturing sectors, and investments in production facilities have been feeble so far. The success of these industries will depend on mak-ing investments to expand production capacity, develop new products, and find new markets.

Larger-scale, greenfield investments are neces-sary to accelerate manu-facturing growth.

7 Ericson bought a plant form Elcoteq in 2009, renovated it to diversify production, and increased produced volumes substantially in 2010.


The slowdown in manufacturing per se is thus not a reason to worry. However, the issue that should be considered is that growth is more sluggish than in Latvia’s closest neighbours: Estonia and Lithuania can enjoy faster GDP growth owing to larger manufacturing sectors. What can be done to accelerate manufacturing and export growth in Latvia? No need to reinvent the bicycle. Our policy suggestions have not changed much since last year – while there have been improvements in the in-vestment and entrepreneurial environments, many things still can and should be done.

(i) The creation of six competence centres (financed with EU funds) to gain synergy from the involvement of the academic, local government, and business sides in developing new, innovative products is a welcome initiative.8 Strengthening cooperation among these sides and supporting research and development are important conditions for Latvian manufac-

rers’ increasing the value added of their products. Not less important eforms of higher and vocational lability, promote innovations, and

t autumn was not used. Now, the room for manoeuvre

general, and tax changes in particular, to

tuand urgent, while still nonexistent, are reducation to increase its quality and avaibring it closer to businesses.

(ii) The plans to accelerate the appropriation of EU funds this year are also encouraging. However, plans sometimes stay only on paper or be-come reality only with delays. For instance, a transfer of large amounts of non-used EU funds late last year to accounts of municipalities (as pre-payments) technically improved the statistics, but have either not turned into tangible business projects and investments so far or have done so with unacceptable delays. The acquisition of EU funds can and should be made more efficient and focused.

(iii) While financing availability has been improving (e.g., sovereign credit ratings have risen due to the stabilising economic and fiscal situation, and banks have become more active in lending), little policy action has been undertaken to strengthen the financial sector via diversification of finan-cial markets (e.g., access to equity capital). Although there are several risk capital funds (incl. those using EU funds), they have been quite inac-tive so far in providing financing.

(iv) Unfortunately, the window of opportunity to restructure the tax burden after elections lasis much smaller, taking into account the planned euro adoption in 2014 and existing trade-off between reducing inflation and lowering the gov-ernment budget deficit. The tax burden on labour was not reduced, while the overall tax burden increased. An easing of the labour tax burden is necessary to lower the labour costs of businesses and lessen incentives for tax evasion, which would help to support investments and promote job creation.

Businesses need a clear outlook for future changes – at least for a few years – regarding fiscal policy in be able to make their investment decisions. Implementation of some of the above-mentioned suggestions is a vital condition for Latvian exports to grow faster than those of competitors.

Lija Strašuna

Improve quality of edu-cation.

Make acquisition of EU funds more efficient.

Improve availability of financing.

Ease labour tax burden.

Medium-term outlook for fiscal policy is needed.

8 These started operating in April 2011. During the five-year period, financing of EUR 53 million will be available. The competence centres include chemistry and pharmacy, IT and communications, wood manufacturing, manufacturing of electronic and optical equipment, and transport engineering, as well as one for the environment, bioenergy, and biotechnology.


Abbreviations CPI – Consumer price index CSBL – Central Statistical Bureau of Latvia DG ECFIN – European Commission's Directorate-General for Economic and Financial Affairs EU – European Union FCMC – Financial and capital market commission FDI – Foreign direct investment FTE – Full-time equivalent IMF – International Monetary Fund PPI – Producer price index WTO – World Trade Organization

Economic Research Department

Sweden Cecilia Hermansson +46 8 5859 7720 [email protected] Chief Economist Chief Economist, Sweden Magnus Alvesson +46 8 5859 33

e

41 [email protected] enior Economist

Jörgen Kennemar +46 8 5859 7730 jorgen.kennemarSenior Economist

+46 8 5859 7740 [email protected]

[email protected]

44 5859 [email protected]

ainis Stikuts +371 6 744 5844 [email protected] or Economist

[email protected] enior Economist

S

@swedbank.se

Anna Ibegbulem Assistent Estonia Annika Paabut +372 888 5440 [email protected] Acting Chief Economist Elina Allikalt +372 888 1989 elina.alSenior Economist

Latvia Mārtiņš Kazāks +371 6 7Deputy Group Chief Economist Chief Economist, Latvia DSeni Lija Strašuna +371 6 744 5875 lija.sS

LithuaniaNerijus Mačiulis +370 5 258 2237 [email protected] Chief Economist, Lithuania Lina Vrubliauskienė +370 5 258 2275 [email protected] Senior Economist


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evelopments. The activddepartments o therefore the o inions expressed in the rep

ions that might be expressed by other employpendent from intereank. b

This reporand reflects the e rsonal and professional opinions of such inform

rstanding of the information at the moment the reflects the economists’ best undeange ofprepared and due to ch

gly. in

This report has be pursuant to the best skills of the economists anto their best knowleaor affiliates sha ny loss or damage, direct or indirect, based ofaults within this rep

Enterprises bereport and procircumstances mig the economic activities of such companies and the pricessecurities issued by them.

The research presente is of an informative nature. This report should in noomis firmation of Swedbank or any of its directors, officersinterpreted as a pr

loyees that the evptow


Swedbank Analysis

Economy & Finance

Transcript of Swedbank Analysis