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Economic Development of Latvia

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Economic Development of Latvia Ministry of Economics Republic of Latvia ECONOMIC DEVELOPMENT OF LATVIA REPORT RIGA JUNE 2008 Commentaries, questions or proposals are to be sent to: Ministry of Economics, Republic of Latvia Brīvības ielā 55, Rīga, LV-1519 Phone: 371-67013119 Fax: 371-67280882 E-mail: [email protected] Homepage: http://www.em.gov.lv The Report was prepared by: O.Barānovs (overall compiling, 1., 4.1.1., 4.4., 6.1.), G.Piņķe (3.1., 3.2.1., 3.2.2., 3.3.1., 3.3.2., 3.5., 4.1.2., 4.1.3., 4.3.1., 4.3.2., 5.1.), E.Gergelevičs (2., 3.2.4.), A.Bessonovs (3.2.1., 3.2.2., 3.4.), M.Kubliņš (3.3.1., 3.3.2.), I.Skribāne (3.2.3., 4.3.3., 5.2.), D.Dravnieks (3.3.3.), J.Salmiņš (4.1.2., 4.1.3.), L.Stelmaka (4.2.), Č.Gržibovskis (5.1.), J.Ušpelis (5.3.), G.Silovs (6.2.1.), A.Gulbis, D.Klinsone, L.Stauvere, S.Pizika, M.Paņkova, G.Ābele, (6.2.2.), O.Bogdanova, G.Jēgere (6.2.3.), T.Grīnfelds (6.3.1.), D.Merirands, D.Eberšteina (6.3.2.), E.Gulbinska (6.3.3.), A.Andriksone, I.Mežecka, I.Grīnberga, M.Paņkova (6.3.4.), I.Beināre, I.Benga (6.4.), U.Vanaga (6.5.), L.Neiders, I.Eglītis (6.6.), K.Šuste (6.7.), M.Stenders, G.Tentere (6.8.), M.Purviņa (6.9.), I.Ozoliņa (6.10.), L.Zemīte, B.Vītoliņa (6.11.), E.Skribnovska, J.Strīpnieks, J.Maurāns, E.Beļskis (6.12.), D.Jirgena, N.Kovolenko, K.Lore, I.Mūrniece (6.13.), I.Lipovska (6.14.), I.Bērziņa (6.14., 6.15.3.) D.Kalnāre (6.15.1., 6.15.2.). All the numerical information and data unless otherwise indicated were provided by the Central Statistical Bureau of the Republic of Latvia. Data of the Bank of Latvia and the Financial and Capital Market Commission have been used in characteristics of the Balance of Payments and the banking and monetary indicators of Latvia. The Treasury of the Republic of Latvia data is used in the characteristics of financial indicators of Latvia. Cover design: SIA „ABC JUMS” Printed: SIA „ABC JUMS” Rūpniecības iela 3, Aizkraukle, LV-5101 Phone: 371-65122888, phone/fax: 371-67142383 ISSN 1407-4109 © Ministry of Economics, Republic of Latvia, 2008 Reference mandatory in case of reprinting and quoting. Dear reader, Programme for Improvement of Competitiveness of Enterprises on May 13, which will facilitate finding funding of Experts of the Ministry of Economics have small and medium-sized enterprises for investments in prepared the 28th Report on Economic technologies or current assets. The enterprises orientating Development of Latvia. The first Report was to international market, ensuring production or published in September 1994 and the following reports providing services with high added value, techno- since 1995 were published traditionally twice a year in logically-intensive production enterprises, as well as June and December. The present Report, like the establishment of new enterprises will be particularly previous ones, evaluates the economic situation in supported. The total amount of investments of the Latvia and progress of reforms, as well as offers programme will reach LVL 200 million, inter alia economic development forecasts. in 2008 – nearly LVL 50 million. That will ensure The fastest economic growth in the European an opportunity to provide support to at least Union was observed in Latvia for several years. Within 300 enterprises. the period from 2005 to 2007, GDP grew on average An investment fund with the total amount of by 11%. This GDP growth has indisputably reduced investment of EUR 200 million is being established, backwardness of our country from the old EU which will make investments in guarantees, high-risk member states. Notwithstanding the considerable rise loans, venture capital funds and other financial in prices, income of the population has also support instruments in order to provide access of the substantially risen. small and medium-sized enterprises to funding for Since the middle of 2007, the growth rates have business start-up and development, as well as started to fall. In the 1st quarter of 2008, the amount of guarantying export credits. It is planned to sign an GDP as compared to the 1st quarter of 2007 has grown agreement with the European Investment Fund, which only by 3.3%. The decrease of the growth rate was will manage this fund planned to sign already in July determined by both, the internal (weakening of this year, but application for resources of the domestic demand incentives), and external processes Investment Fund will be begun at the end of this year. (decrease of the global growth rates) influencing The mentioned measures will stabilise and promote economics. the economic growth in the next two years. Taking into account the current economic The third direction, in which return is expected development tendencies in both the world and in within a medium-term period, is related to the set of Latvia, the government has set the main task – not to measures aimed at promotion of knowledge-intensive allow rapid decline of the growth and ensure economics, i.e., promotion of knowledge and conditions for sustainable growth. technology transfer in production in order to ensure The main directions of action of the government in manufacture of higher value added products. The set the sphere of economic stabilisation are reflected in of measures for reaching this goal is very extensive, the Informative Report on the Measures for Stabilisation of therefore I will mention only some of them. Macroeconomic Situation for 2008-2009 adopted on April Upon attracting funding of EU Structural Funds, it 15 this year. The main emphasis in it is on the initiated is planned to start implementation of the Competence fiscal consolidation, increase of budget efficiency and Centre Programme in 2008. The purpose of the improvement of tax policy, promotion of productive Programme is promotion of competitiveness of capacity, especially in trade sectors, as well as on enterprises by facilitating co-operation of research and implementation of the policy directed towards industrial sectors in implementation of development knowledge-intensive economics. projects of industrial studies, new products and In order to support entrepreneurship, it is planned technologies. The total funding of the programme is to make substantial amendments to the existing tax LVL 54.8 million. policy regulations – channelling tax burden from The Ministry of Economics has also started to investments. Amendments to the Law on Corporate implement the Development Programme of Innovation Tax are introduced in order to establish reinvestment Centres and Business Incubators. It is aimed at promotion incentives. of improvement of innovation infrastructure, support of Intensive work is taking place in order to improve innovation centres, and establishment and operation of business environment, promote business start-up, business incubators, as well as at provision of innovation access to finances, export, as well as ensure fair centre and business incubator services to new enterprises. competition. The government has approved the 11 projects of innovation centres and business incubators annual Action Plan for Improvement of Business Environment are supported within the framework of the programme. for 2008. The 32 measures included in it envisage Upon attracting the funding of EU Structural simplification and improvement of construction Funds, this year it is planned to start implementation process, simplification of the registration process of of the State support programme Development of New real estate, improvement of the state administration Products and Technologies. The goal of the Programme is services, etc. to support development of new or substantially In order to promote business start-up and improved products, services or technological processes access to finances, the government approved Support by ensuring support also to introduction of successfully developed new products, services or The Cabinet of Ministers has not assessed all issues technological processes into production. The total addressed in the Report, hence, many conclusions on funding for the programme for 2008–2013 is LVL the economic development of the country and 162.2 million. proposals for further action reflect purely the opinion One of the main challenges of the Ministry of of experts of the Ministry of Economics. Economics for the next years will also be I hope that the Report will be useful for implementation of energy development policy in order economists and entrepreneurs and everyone interested to improve safety of energy supply and reduce in the issues of the economic development of Latvia dependence on imported energy resources. and will encourage exchange of opinions between In order to achieve the set goals, we will continue public institutions, various organisations and interest the dialogue with our social partners (entrepreneurs groups, economists and other stakeholders. and non-governmental organisations representing I would like to express my gratitude to the authors them). This is the only way of how to ensure of the Report. sustainable growth in the long-term perspective. In the Report, you will find information both on June 2008 the development of main economic and social indicators, growth of national economy sectors and external economic environment, and on the government’s economic policy for promotion of growth and employment, foreign trade policy, utilisation of the EU Structural Funds and the Cohesion Fund, innovation and entrepreneurship policy and other economic reforms. In the conclusion, the authors of the Report give recommendations for Kaspars Gerhards improvement of the national economic policy.
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