Kurzeme optimistic, Latgale pessimistic about business prospects

The further east you go in Latvia, the less optimistic the business sentiment becomes, according to the latest edition of Citadele bank's business index survey. 

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 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.

Mārtiņš Āboliņš, Citadele Bank Economist (pictured) commented: “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.”

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.

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.

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