According to the Rīga-based newswire, with the slowdown of economic growth in the second half of the year, the ministry expects that the labor market would also be recovering at a more moderate rate.

“Compared to 2011, the number of employees may grow 1.5 percent in 2012. The employment rate in the age group of 15-74 years could be 56.5 percent on average, which would be an increase by 1.3 percentage points from 2011. But it has to be said that growth of employment in the coming years will be slower than the economic growth because output will also be based on increased productivity,” the Economics Ministry was quoted as saying in its reported.

This year there might be a slight decrease in the number of employees in the sector of public services as well as in extractive industry and mining, the ministry said, BNS reported.

According to BNS, with the growth of employment in 2012, unemployment will keep shrinking. “The unemployment rate in 2012 is expected to drop by 2 percentage points from 2011 to an average 13.4 percent during this year,” the Economics Ministry was quoted as saying in the report.

“The hospitality industry, the construction industry and the information and communications industry are expected to show comparatively steeper growth in 2012. These trends will also be reflected in the demand for labor in general. Higher demand for labor is likely also in the transport and warehousing sector and in the professional, scientific and technical services,” the ministry was quoted as saying.

According to preliminary information from the Latvian State Employment Agency (NVA), cited by BNS, the unemployment rate in Latvia was at 11.6 percent of the economically active population, in the second half of January.

According to the Riga-based newswire, the number of export declarations grew by 19.3 percent from 2010 to 96,700 declarations in 2011.

The tax authority’s data reveal that judging by their statistical value goods were mostly exported to Russia, Norway, and Belarus, BNS reported. Russia received 170.7 million lats (EUR 242.88 million) worth of beverages, alcohol, and vinegar, and 90.3 million lats (EUR 128.48 million) worth of equipment and mechanical tools. Norway received 31.5 million lats (EUR 44.82 million) worth of timber and timber articles, and 20.8 million lats (EUR 29.59 million) worth of iron and steel products. Belarus received 15.8 million lats (EUR 22.48 million) worth of land transport vehicles from Latvia.

According the State Revenue Service’s information, cited by BNS, the number of import declarations drawn up in 2011 increased by 20.3 percent year-on-year to 102,000 in 2011.

According to BNS, The statistical value of Latvian imports grew by 325.3 million lats (EUR 462.86 million), or 21.9 percent year-on-year, to 1.81 billion lats (EUR 2.57 billion).

Just like the year before, BNS reported, in 2011 Latvia imported goods mostly from Russia, Belarus, and China, in terms of their statistical value. Russia supplied 385.12 million lats (EUR 547.97 million) worth of fossil fuel, 105.07 million lats (EUR 149.5 million) worth of iron and steel, and 35.35 million lats (EUR 50.29 million) worth of timber and timber articles. Belarus supplied 151.25 million lats (EUR 215.21 million) worth of fossil fuel, 86.2 million lats (EUR 122.65 million) worth of iron and steel, and 13.21 million lats (EUR 18.79 million) worth of timber and timber articles. China supplied 65.87 million lats (EUR 93.72 million) worth of electrical equipment and appliances, 35.48 million lats (EUR 50.48 million) worth of machines and mechanical tools, and 12.89 million lats (EUR 18.34 million) worth of furniture, BNS reported.

By doing so, R&I returns Latvia’s rating to the investment level. In general, this is an important assessment of Latvia’s economic development potential. By now the investment-category rating has also been granted to Latvia by the agencies Fitch Ratings and Moody’s.

“We are all witnesses to a unique moment, when the majority of countries all over the world face a reduction of ratings, but for Latvian – on the contrary – it is increased. The ratings agency recognized the achievements of the government and the whole society in order to balance the economy of our country. Therefore this assessment is of double importance to Latvia!” said Finance Minister Andris Vilks.

The rating agency recognizes efforts made to stabilize the economic situation and adjust economic structures in Latvia after being engulfed by the economic crisis in 2008. With the government’s fiscal consolidation also progressing better than scheduled, the predictability of Latvia’s fiscal position and the certainty of the government financing have increased as well.

The agency emphasizes the fact that following the dissolution of parliament and the snap general elections in September 2011, Prime Minister Valdis Dombrovskis has remained in place, and such a political development has also been contributing to securing the stability of the government’s fiscal management. The European Union and International Monetary Fund international loan program was also concluded on schedule in December 2011.

The rating agency states that the economic and financial situation in Europe, with which Latvia has strong linkages through trading and banking activities, has grown increasingly murky. However, R&I sees it has become less likely that Latvia’s economic and fiscal stability will be greatly shaken even with a further deterioration of the external environment.

Real gross domestic product (GDP), which plunged in the wake of the global financial crisis, has grown on a year-on-year basis since the third quarter of 2010. In the third quarter of 2011, GDP growth of 6.6% was recorded.

According to the government’s forecast, full-year growth in 2011 is expected to be 4.5%, as external demand is expected to be subdued in 2012 due to the economic malaise in Europe, which is Latvia’s main destination for exports.

R&I states that according to government’s forecasts the economic growth rate will throttle down to 2.5%. Even if the growth rate in 2012 falls somewhat below the government outlook because of deterioration in the external environment, R&I sees little probability the economic fundamentals will be deteriorated.

“The assessment of the Japanese ratings agency is important because it increases the recognizability of Latvia in the Asian economic environment and financial market, providing the state and companies with an opportunity to make international cooperation more actively and broaden the scope of investors. This will improve trust and interest of investors in Latvia,” stated the minister.

According to the Rīga-based newswire, exports of timber and timber products reached 947.877 million lats (EUR 1.345 billion) in the first eleven months of 2011, growing by 15.9 percent from the same period last year and accounting for 87.1 percent of total Latvian exports of forestry products in January-November last year.

Sawn timber exports grew 2.3 percent year-on-year to 265.744 million lats (EUR 378.12 million), BNS reported, and made up 24.4 percent of total forestry industry exports in January-November 2011. Round timber was exported for 149.484 million lats (EUR 212.69), up 17.2 percent from last year, and made up 13.7 percent of the industry’s total exports during the 11-month period

last year. According to BNS, firewood exports increased by 8 percent to 133.678 million lats (EUR 190.20 million) and amounted to 12.3 percent of total Latvian forestry industry exports.

The newswire also reported that during the first eleven months of 2011, Latvia also exported 93.226 million lats (EUR 132.64 million) worth of plywood at a 23 percent rise from the same period in 2010, which accounted for 8.6 percent of total forestry industry exports. Chipboard exports grew by 4.2 percent to 79.192 million lats (EUR 112.68 million), making up 7.3 percent of total exports in the first eleven months of last year.

In January-November 2011, BNS reported, Latvia also exported 71.154 million lats (EUR 101.24 million) worth of paper, cardboard and their products at a 40.2 percent rise year-on-year, accounting for 6.5 percent of total forestry industry exports. Wooden furniture exports rose 3.6 percent to 55.183 million lats (EUR 78.51 million), making up 5.1 percent of total exports.

According to the newswire, during the first eleven months of 2011, Latvia supplied its forestry products mainly to Sweden (16.2 percent), Germany (11.8 percent) and the UK (11.6 percent). As compared to the first eleven months of 2010, forestry industry exports to Sweden increased by 19.2 percent to 176.659 million lats (EUR 251.36 million), exports to Germany increased by 15.1 percent to 128.247 million lats (EUR 182.48 million), and exports to the UK grew 10.2 percent to 125.988 million lats (EUR 179.26 million).

During the first eleven months of 2010, Latvia exported 932.64 million lats (EUR 1.327 billion) worth of forestry industry products, BNS reported.

According to State Revenue Service (VID) data, cited by BNS, in 2011 as many as 93,600 unemployed people registered with NVA found permanent jobs, including 73,235 people or 78 percent found jobs after participation in NVA activities.

NVA said that last year the number of long-term unemployed people who found permanent jobs continued rising, to 29,638 people as compared to 5,135 people in 2009 and 22,345 people in 2010, BNS reported. In the 12 months of 2011 permanent jobs were found by 18,326 young jobless people and 2,341 people in pre-retirement age.

“Most successful last year were qualified workers and craftsmen, such as builders, tailors, locksmiths, pastry-cooks, carpenters, electricians, etc. Jobs were also found by different specialists – salesmen, accountants, nurses, office administrators,” the agency was quoted as saying.

According to the newswire, NVA deputy director Vivita Pūliņa underscored that the agency offers different services, helping job seekers to increase their competitiveness and integrate in the labor market, find a job, become a businessman or a self-employed person. “Events to raise competitiveness — short courses, seminars, lectures – are very popular. NVA offers professional training and informal education programs,” Pūliņa was quoted as saying.

BNS reported that the unemployment rate in Latvia was at 11.6 percent of the economically active population, according to preliminary information from NVA as on January 15, 2012. The number of people officially registered as unemployed in Latvia was 131,011.

Writing for the website Macroeconomics.lv, Paula noted that the main contributor was the diminished impact of the prices of fuel and unprocessed foods. “The average rise in consumer prices by 4.4% observed in 2011 was mostly related to the impact of indirect taxes as well as global energy resource and food prices,” she reported.

The Bank of Latvia economist observed that compared to November, the consumer prices in the groups of goods and services characteristic of core inflation rose by a total of 0.3% in December. She wrote, “That could be related to additional demand in the holiday season, because irrespective of the drop in the prices of unprocessed foods, the prices of processed foods rose as did those of alcoholic beverages, tobacco and services of the catering industry.”

Paula also noted that the drop in annual inflation in December was primarily determined by the base effect of the prices of fuel and unprocessed foods: in the corresponding period of the previous year these prices grew much faster. Meanwhile, she reported, the period of high base for the prices of compensated medications ended and that increased the impact of regulated prices on the annual inflation.

Paula summed up her piece for the website by noting that even though the global factors preclude a substantial drop in 2012 in such price groups as food and oil products, their prices are unlikely to continue to rise rapidly. Tensions in the oil producing countries of the Middle East have not been resolved, she noted, yet global consumption – the debt crisis of the European countries notwithstanding – is growing gradually because of the stable growth in other regions of the world, particularly in Asia.

She concluded: “That means that the impact of the above factors will not express itself so sharply also in the price trends in Latvia and will translate into a substantially lower inflation this year. Moreover, the impact of the problems of the European countries affected by the debt crisis is inflation-reducing. Slower global and Latvian economic growth as compared to the rates in 2011 create a smaller pressure on prices both in Latvia and Latvia’s main trading partners. The appreciation of natural gas and heating energy will be an inflation-supporting factor, for the high level of the prices of heavy oil observed in mid-2011 has substantially pushed up the 9-month average indicator to which these tariffs are pegged, albeit with a certain delay. It can therefore be expected that the average annual inflation this year will drop to 2.4%, as predicted previously.”

Link to full text and graph: http://www.macroeconomics.lv/inflation-2011-latvia-result-taxes-and-global-prices.

Writing for the website Macroeconomics.lv, Krasnopjorovs observed, “It is expected that during the remaining winter months the level of registered unemployment could rise slightly – 0.1–0.2 percentage points a month – yet as seasonal vacancies would appear in spring (particularly in construction, agriculture and restaurants), unemployment drop would resume. In 2012 overall, with a slower development of the economy, the drop in registered unemployment will also be about half of what it was in 2011 when it amounted to 2.8 percentage points. In the second half of the year, the level of registered unemployment may approach 10%, but the annual average is likely to exceed the Ministry of Welfare forecast (10.1%).”

In his commentary piece for the website, the Bank of Latvia economist noted that given the uncertain external environment, business confidence regarding the further employment dynamics remains cautious. However, he wrote, the rise in employment in 2011 almost matched the rate in 2007 despite unpronounced (around zero –as presently) business tendency. “This points to the risk that the business tendency data assess the subjective mood of the entrepreneurs, reflecting the view of today and yesterday but may not help to make credible predictions about tomorrow,” Krasnopjorovs reported.

The Bank of Latvia economist also noted that at the end of 2011, 2.5 thousand vacancies were registered with the State Employment Agency (SEA). However, he wrote, the whole number of vacancies in the economy is much greater, since only those vacancies that the entrepreneurs hope to fill with the unemployed (and these tend not to be top positions) are registered with SEA.
Krasnopjorovs also reported that the firm’s survey data by the Central Statistical Bureau (CSB) likewise do not include all vacancies. For instance, he noted, at the end of the third quarter only 1.3 thousand vacancies were listed for the private sector, thus not including even the majority of vacancies registered with the SEA. The Bank of Latvia economist concluded: “All of this should be borne in mind when one reads in the media that ‘X unemployed are competing for one vacancy.’ Determining vacancies in statistics is even more complicated than including all the

unemployed: the number of the unemployed per vacancy tends to be much lower than possible to calculate from any official data.”

Link to full text: http://www.macroeconomics.lv/unemployment-drop-halve-year.

President Bērziņš confirmed that Latvia is interested in and supports Rail Baltica and other transport infrastructure projects in the Baltic States, because Rail Baltica is important not just in terms of the development the relevant infrastructure, but also in terms of fully linking the Baltic transport infrastructure to that of the rest of Europe. Kallas said that the European Commission supports the Rail Baltica project, adding that if the project is completed successfully, then that will be an important stimulus for Latvia’s economy. The two officials agreed that active co-operation must continue to find the necessary financing for the project and to determine the route for the railroad that would be of greatest economic advantage.

In relation to the EU’s budget debates, Kallas said that the main goal for the Danish presidency of the EU in this regard is to reduce differences of opinion among member states as much as possible when it comes to the multiyear budget. The President and the commissioner also discussed the new European Union treaty, expressing the hope that it will represent a substantial investment in ensuring financial stability in the EU.

President Bērziņš went on to speak about Latvia’s position on agricultural financing in the multiyear budget, recalling that during the existing budgeting period, Latvia has received the lowest direct payments per hectare in the entire EU. He added that the European Commission’s proposal on the new budget is inadequate given the real market situation, as well as agricultural production costs which, in Latvia, are at the level of the EU average. This has a negative effect on the competitiveness of Latvian farmers, the President said. Bērziņš added that Latvia insists that the new payment of direct payments must take effect immediately, without any transition period, and with full financing. Commissioner Kallas confirmed that he understands Latvia’s position on this matter.

At the conclusion of the meeting, Kallas congratulated Latvia on having successfully completed its aid program from the International Monetary Fund.

According to the Rīga-based newswire, Rjabcevs said that, according to the data of PMLP, 1,956 foreigners have used the possibility to apply for a term residence permit in Latvia in exchange for investments in the Latvian national economy, and the investments have amounted to 123 million lats (EUR 175 million).

“Similar to last year, most foreigners were interested in a possibility to receive a residence permit for buying a property in Latvia — as many as 1,549 foreigners applied for a residence permit because their or their family members have bought a property in Latvia worth at least 100,000 lats [EUR 142,287] or 50,000 lats [EUR 71,143],” Rjabcevs was quoted as saying, adding that foreigners most often have been interested in apartments in Rīga and Jūrmala, making 325 and 225 purchases respectively in these locations.

Foreigners have invested 95.8 million lats (EUR 136.3 million) in real estate in Latvia, he said.
BNS reported that as many as 24.4 million lats (EUR 34.71 million) have been invested in subordinated capital of banks, also allowing foreigners to apply for a permit of residence. According to Rjabcevs, this opportunity was taken by 293 investors and their family members.
As many as 2.7 million lats (EUR 3.84 million) have been invested in share capital of 53 companies, allowing grant residence permits to be granted to 114 people, BNS reported.
According to BNS, under the amendments to the Immigration Law effective from July 1, 2010, citizens of third countries can apply for a permanent residence permit in Latvia, provided that they have invested 100,000 lats (EUR 142,000) in real estate in the Latvian capital or the surrounding region or 50,000 lats (EUR 76,000) in real estate in other locations in Latvia, in subordinated capital of banks or share capital of a Latvian company.

In a year and a half a total of 2,257 investors and their family members have applied for residence permits in Latvia after they have invested a total of 142.5 million lats (EUR 202.76), BNS reported.

According to the Rīga-based newswire, in November of this year the monetary financial institutions reported 1.7 million lats (EUR 2.41 million) in aggregate profit.

BNS also reported that aggregate assets of the Latvian monetary financial institutions stood at 19.502 billion lats (EUR 27.74 billion) on Nov. 30, 2011, down by 2.8 percent, or 569.7 million lats (EUR 810.61 million), from 20.072 billion lats (EUR 28.55 billion) a year ago.

According to BNS, the balance of loans issued to residents by the Latvian monetary financial institutions was 11.634 billion lats (EUR 16.55 billion) in late November 2011, or 7.6 percent smaller than a year ago. This included 1.227 billion lats (EUR 1.74 billion) in lat-denominated loans to residents, up 30.5 percent year-on-year, and 10.407 billion lats (EUR 14.79 billion) in loans to residents in foreign currencies, which is a 10.7 percent drop from the end of November 2010.

The balance of resident deposits totaled 5.194 billion lats (EUR 7.39 billion) at the end of November this year, BNS reported, down 3 percent from the same period last year, including 2.417 billion lats (EUR 3.43 billion) in lat-denominated deposits, down 9.5 percent year-on-year, and 2.777 billion lats (EUR 3.95 billion) in deposits in foreign currencies, up 3.5 percent.

According to BNS, the capital and reserves of the Latvian monetary financial institutions totaled 1.854 billion lats (EUR 2.63 billion) at the end of November this year, which is a growth by 11.8 percent from late November last year.

In the first 11 months of 2010, BNS reported, the Latvian monetary financial institutions posted 311.1 million lats (EUR 442.65 million) in aggregate loss.

Monetary financial institutions are credit institutions and other financial institutions accepting deposits from customers that are not monetary financial institutions, as well extending loans from own funds and investing in securities.