Ex­pert: out­look on fu­ture for pro­cess­ing in­dus­try re­mains op­ti­mistic

Baltic News Network - - News -

The general mood in in­dus­try re­mains op­ti­mistic on the lo­cal and ex­port markets, which leads us to be­lieve that Fe­bru­ary’s slow­down will not have a last­ing ef­fect, Swed­bank econ­o­mist Linda Vil­dava com­ments data on Fe­bru­ary’s in­dus­trial out­put. Vil­dava ex­plains: «In Fe­bru­ary 2017 pro­cess­ing in­dus­try re­turned to mod­er­ate growth rate – pro­duc­tion vol­umes have grown by 4.6%.»

It should be noted that DNB Bank’s econ­o­mist Pe­teris Strautins is also op­ti­mistic about CSB data: «It may have had de­clined some­what in March be­cause of the base ef­fect. Pro­duc­tion vol­umes in the first three months of last year were like stairs. The out­look for this year does re­main pos­i­tive. Look­ing at the sit­u­a­tion from the per­spec­tive of dif­fer­ent sec­tors, we see that the sit­u­a­tion noted in Fe­bru­ary is nearly the op­po­site of the sit­u­a­tion that was noted one year ago. Pro­duc­tion out­put de­clined at the same time in logging and food pro­duc­tion, which is unusual. Both sec­tors were doing well last year. Out­put in me­chan­i­cal en­gi­neer­ing and elec­tron­ics, on the other hand, con­tin­ues to grow.»

Some sec­tors have man­aged to main­tain two-digit growth rates in previous months. They con­tinue in­creas­ing out­put vol­umes. As ex­am­ples, the econ­o­mist men­tions com­puter, elec­tronic and op­ti­cal equip­ment (34.8%), ma­chiner­ies and mech­a­nisms (15.7%), as well as man­u­fac­tur­ing of ve­hi­cles and trans­port equip­ment (17.4%). The suc­cess of pro­cess­ing in­dus­try lead­ers has de­clined some­what. Man­u­fac­ture of metal prod­ucts has grown 3.2%, whereas pro­duc­tion vol­umes in food pro­duc­tion and logging have de­clined (by 4.1% and 1.0% re­spec­tively).

«We’ve no­ticed that dy­nam­ics of pro­cess­ing in­dus­tries can be rather un­sta­ble. Of course, it is no sim­ple task to main­tain growth rates that were reg­is­tered at the end of 2016 and be­gin­ning of 2017. Pro­ducer prices in Latvia, when com­pared with other EU mem­ber states, grow slowly. Nev­er­the­less, labour force cost in­crease in in­dus­try noted in Q4 2016 was one of the most rapid in the EU,» Vil­dava com­ments.

The ex­pert also men­tions that grow­ing costs will not out­weigh im­prove­ments in pro­duc­tion out­put: «Busi­nesses risk los­ing com­pet­i­tive­ness or be forced to re­duce profit mar­gin. Sta­tis­tics on loan amounts is­sued to pro­cess­ing in­dus­try in 2016 could mean that companies have ma­tured enough for in­vest­ments. The out­look on fu­ture in pro­cess­ing in­dus­try re­mains op­ti­mistic.»

DNB Bank econ­o­mist Strautins notes that the sit­u­a­tion on external markets is mostly pos­i­tive, but there are also risks. «The sharp con­trast be­tween two types of eco­nomic in­dexes cre­ates some con­fu­sion. This is es­pe­cially true for USA and Europe. The so-called soft in­dexes in USA are close to the strato­sphere. For ex­am­ple, con­sumer mood in­dexes show that con­sump­tion may grow 7%. Companies of cer­tain sec­tors are very op­ti­mistic as well. Hard in­dexes that mea­sure ac­tual pro­duc­tion and con­sump­tion vol­umes show that noth­ing spe­cial has changed and the econ­omy con­tin­ues grow­ing by ap­prox­i­mately 2%,» he says.

Strautins com­ments about the sit­u­a­tion as a whole: «Peo­ple of­ten say and write that in­dus­try de­pends on the sit­u­a­tion in global econ­omy. Like many other pop­u­lar sim­ple facts about Latvia’s econ­omy, this is partly true. But it can be ex­ag­ger­ated too. Pro­duc­tion was grow­ing in 2012, when Euro­zone was ex­pe­ri­enc­ing re­ces­sion. Our in­dus­trial sec­tors have a spe­cific struc­ture. Good com­pe­ti­tion helps re­main dif­fer­ent from EU’s general eco­nomic trends. Nev­er­the­less, there are also weak points.»

Newspapers in English

Newspapers from Latvia

© PressReader. All rights reserved.