Danske Bank: recovery of Baltic economies gaining momentum 10.06.2011, 16:35
The recovery in the Baltic countries has started to gain momentum, analysts from Danske Bank point out in a global economic report, writes The Baltic Course.
''Although domestic demand has started to show the first signs of recovery, the main growth driver remains robust export growth. Growth in the Baltic States will continue to be driven by exports to the key export markets that demonstrate robust growth performance (i.e. the Nordic countries, Germany, Russia and Poland),'' the report says.
Analysts expect domestic demand to start to make more of a sustainable recovery in the Baltics this year, and point out that the key assumptions for this are a healthier banking sector, faster income growth and low base effect.
''Next year we expect to see more broad based growth patterns: the recovery in domestic demand along with rising private investment should become an important growth source that will ensure the economies to grow by another 4-5 percent,'' Danske Bank points out.
However, the analysts point out that the recovery trend in the region is becoming less uniform.
''The Latvian GDP result for Q1 disappointed with a deceleration in growth, while in the other Baltic economies, growth continued to gain speed. Current developments in economic indicators show that the Latvian recovery is still fragile and is almost completely driven by growth in net exports,'' the report goes on to say.
Danske Bank points out that the fiscal consolidation policy in Latvia has had a dampening effect on the recovery in domestic demand.
"'There are a number of risks that could further impede the recovery of domestic demand in Latvia this year, in particular fiscal consolidation policy. On the other hand, this is an inevitable necessity that would ensure a stable macroeconomic environment and sustainable growth in the medium term,'' analysts say.