Latvia Country Risk Report

Published 27 May 2015 | Quarterly

  • 48 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Latvia Country Risk Report

Core Views

  • Latvia's economic recovery will continue into 2015 and beyond, although we emphasize that strong headline real GDP growth is largely a result of statistical base effects. We see growing scope for the government to ease up on its long-held policy of fiscal austerity going forward.

  • The Russian embargo on EU agricultural goods has weakened the growth outlook and Latvia will be among the worst EU states affected.

  • Growth will remain subdued due to the need for further deleveraging.

Major Forecast Changes

  • We have downgraded our forecast for Latvia's real GDP growth as the escalating trade war between the EU and Russia is adversely affecting Latvia's goods and services export prospects. We now forecast Latvia to grow by just 2.0% in 2015 from 2.2% previously due to the impact of the Russian embargo on trade.

Key Risks To Outlook

  • The prevailing risk to our forecasts for Latvia remains the persistent eurozone sovereign debt crisis. A further deepening of the crisis would pose downside risks to most of our forecasts.

Macroeconomic Forecasts (Latvia 2013-2016)
Indicator 2013 2014e 2015f 2016f
National Sources/BMI
Real GDP growth, % y-o-y 4.1 2.1 2.0 4.3
Nominal GDP, EURbn 22.9 23.4 23.7 25.1
Consumer price inflation, % y-o-y, eop -0.4 0.8 0.3 2.9
Exchange rate EUR/USD, eop 0.72 0.83 1.00 0.93
Budget balance, % of GDP -0.9 -1.5 -1.1 -0.8
Current account balance, % of GDP -0.6 -3.2 -3.4 -3.9

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Coalition To Remain Intact
8
table: Political Overview
8
Long-Term Political Outlook
9
Slower Growth And Ethnic Tensions Key Themes To 2024
9
Chapter 2: Economic Outlook
11
SWOT Analysis
11
BMI Economic Risk Index
11
Economic Activity
12
Growth Outlook Deteriorates Further
12
Table: GDP By Expenditure
12
Balance Of Payments
14
Deleveraging May Be Delayed By Russian Embargo
14
Table: Current Account
15
Fiscal Policy
16
No Major Budget Adjustments Expected
16
table: Fiscal Policy
16
Chapter 3: 10-Year Forecast
19
The Latvian Economy To 2023
19
Looking For A 'New Normal'
19
table: LONG-TERM MACROECONOMIC FORECASTS
19
Chapter 4: Operational Risk
21
Operational Risk Index
21
Operational Risk
22
Table: Developed States - Labour Market Risk
22
Table: Developed States - Logistics Risk
25
Table: Developed States - Crime And Security Risks
27
Table: Developed States - Trade And Investment Risk
30
Chapter 5: Key Sectors
33
Shipping
33
table: Major Ports Data
34
Other Key Sectors
39
Table: Pharma Sector Key Indicators
39
Table: Telecoms Sector Key Indicators
39
Table: Infrastructure Sector Key Indicators
39
Table: Food and Drink Sector Key Indicators
40
Table: Autos Sector Key Indicators
40
Table: Freight Key Indicators
40
Chapter 6: BMI Global Assumptions
41
Global Outlook
41
Reality Check: Uncertainty Reigns
41
Table: Global Assumptions
41
Table: Developed States, Real GDP GrowtH, %
42
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
42
Table: Emerging Markets, Real GDP Growth, %
43

The Latvia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Latvia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Latvia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Latvia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Latvia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Latvia, including currency volatility, the commodity price boom and protectionist policies.

The Latvia Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Latvia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Latvia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Latvia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Latvia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Latvia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Latvia over the next 5-years?

BMI's Latvia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Latvia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Latvia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Latvia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Latvia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Latvia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Latvia?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Latvia against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Latvia’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Latvia will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Latvia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express