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Expert: no down time expected – pressure on wages will only continue

Gundars Bērziņš/twitter.com.
«We can safely predict that pressure on wages will only increase this year and the gap between wages and productivity will only increase. If we fail to find a solution on a national and company level, it could create a risk for Latvia’s competitiveness,» said dean, associated professor Gundars Bērziņš of Business, Management and Economics Faculty of the University of Latvia.

He emphasized that Latvia should be prepared for a high inflation this year – 3%. This will likely affect all people’s purchasing power.

According to him, 2017 passed under the sign of reforms for Latvia. Several of the country’s state systems – tax, healthcare and education – were reformed. «2018 will likely be similar, if not more interesting, because we will see the first results from reforms. Upcoming Saeima elections and collisions of political parties will likely add a dose of adrenaline.»

European Union and especially Latvia’s economy experienced rapid growth last year. «Growth was secured largely thanks to funding from structural funds, which will remain accessible this year as well. More and more experts propose thinking and planning the function of Latvia’s economy without Europe’s generous support,» Bērziņš told Dienas bizness.

Economics faculty dean believes that 2018 will be even more generous for banks. «Restructuring processes in banks will also provide results, as will experience working with non-residents.»

Bērziņš emphasizes that the year will not be easy for real estate sector. Stagnation is expected for the housing market, whereas the office segment is expected to experience stagnation. «Along with economic growth, there has been an increase for wages. Unemployment indexes are also coming close to natural unemployment level. This is why employers more often complain about lack of well-trained workers, which forces them to hire workers from neighbouring countries, such as Belarus and Ukraine.»

The expert also told the newspaper that this year’s fuel price increase will affect transport and logistics companies. «The tax reform will definitely have an impact on business development. We will see what path Latvian companies decide to follow – will they pull out profits in dividends or, as the reform would suggest, reinvest money in business development? Will businesses even continue working in Latvia or decide to relocate to a different country with a better and more transparent tax regime?»

Meanwhile, the most significant challenges for 2018 will include attraction of a strategic or financial investor for airBaltic, future development strategy for Latvijas dzelzceļš and Latvian port to reduce dependence on Russian cargoes and Europe’s intention to stop using coal, the economist said.


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