Ivars Godmanis became the Prime Minister of Latvia, completing the biggest political comeback in post-independence Latvia. He was the Prime Minister once before, from 1990 to 1993. That time, he left the office deeply unpopular. Before the 1993 elections, he was abandoned by most of his political allies who let him take the plame for the economic difficulties of post-Soviet Latvia. Godmanis-lead Popular Front (Tautas Fronte) went from a two-thirds majority in 1990 to 2.62% of popular vote in 1993. It looked like his political career was finished for good.
Godmanis spent some time as a manager in various companies. He then attempted to come back to politics with Latvian Way party... which soon lost all its seats in the parliament in the 2002 election and was abandoned by many of its most prominent members, just like Popular Front was abandoned in 1993. Once again, Godmanis looked like washed-up politician whose time has passed.
Then, Latvian Way merged with another struggling party, Latvia First Party. Together, they managed to get into the parliament in 2006. Godmanis became the minister of interior affairs. Back in the government, he looked reasonably competent. And, when Kalvitis' government fall in the flames of public anger, Godmanis emerged as the person to lead the new government.
We don't know what happened behind the scenes but some journalists were mentioning Godmanis as a candidate long before he was nominated. I saw a newsmagazine predicting Godmanis' nomination on October 17, a day before the famous protest against Loskutovs firing. That was almost a month before Kalvitis officially resigned. Some Latvian journalists have very good sources...
Economically, the slowdown continues. Consumer confidence index has fallen below 50% for the first time. The slowdown is not affecting anyone around me yet, though.
And Latvian U-20 ice hockey team has qualified for next year's top-division World Championships, by winning this year's Division 1B championships. Very good, our adult team needs some good younger players.
Thursday, December 27, 2007
Tuesday, December 18, 2007
Monday, December 10, 2007
Latvian trade statistics
Latvian Statistics office reports that Latvian exports grew 23.4% year-on-year in October 2007, while imports grew only 12.1%. This is the third consecutive month of exports growing faster than imports, as the graph below shows (the green line is the exports, the red line is the imports):
It's a good sign. Latvian imports are nearly twice the exports and Latvia pays for a lot of that by borrowing money from Scandinavian banks. That is something that cannot last forever and it's good that adjustment has started. It's still a long way to go, though: Latvia has only gone from importing 2.01 times its exports (October 2006) to 1.83 times its exports (October 2007). I hope the trade balances out before Latvia runs up too much of debt, but I'm far from sure about that.
In other news from the statistics office, the inflation is up from 13.2% to 13.7%.
It's a good sign. Latvian imports are nearly twice the exports and Latvia pays for a lot of that by borrowing money from Scandinavian banks. That is something that cannot last forever and it's good that adjustment has started. It's still a long way to go, though: Latvia has only gone from importing 2.01 times its exports (October 2006) to 1.83 times its exports (October 2007). I hope the trade balances out before Latvia runs up too much of debt, but I'm far from sure about that.In other news from the statistics office, the inflation is up from 13.2% to 13.7%.
Sunday, December 09, 2007
Added to the blogroll
Two new English-language blogs from Estonia!
AnTyX has a mixture of posts on economics, politics and everyday life. Of particular note: the recent post about why it's legally impossible to devaluate the Estonian kroon.
Ivan vs. Jaan focuses on Russia and Estonian-Russian relations. Most recent post focuses on the Russian plans of "velvet re-privatization" (FSB-related people forcing Russian company owners to sell them).
AnTyX has a mixture of posts on economics, politics and everyday life. Of particular note: the recent post about why it's legally impossible to devaluate the Estonian kroon.
Ivan vs. Jaan focuses on Russia and Estonian-Russian relations. Most recent post focuses on the Russian plans of "velvet re-privatization" (FSB-related people forcing Russian company owners to sell them).
Thursday, December 06, 2007
How do people handle devaluation fears?
A commenter asks:
Out of those who have savings, some hold them in euros. (I've been advised to do that by several people.) Others just shrug off the devaluation fears. We've had devaluation rumours circulating locally in our country since February or March and nothing has happened yet... I now start seeing more people who are just disregarding devaluation rumours as background noise.
How do people cope with possible devaluation fears, do they hold saving in euro's, I can't see why they wouldn't.First of all, a lot of people don't have much savings. There' s much more debt than savings. Latvia has 140% of its annual GDP in its external debt and most of this debt has been generated by people and companies, rather than the government (whose debt is just 10% of GDP).
Out of those who have savings, some hold them in euros. (I've been advised to do that by several people.) Others just shrug off the devaluation fears. We've had devaluation rumours circulating locally in our country since February or March and nothing has happened yet... I now start seeing more people who are just disregarding devaluation rumours as background noise.
Is it allowed or common in Latvia to pay for every day things with other than a local currency?No. But it's easy to change currencies or to have a foreign-currency account at a local bank and change the money to lats whenever necessary.
Wednesday, December 05, 2007
Retrospective on Kalvītis government
Today, Latvian prime minister Aigars Kalvītis turned in his resignation, as he promised a few weeks ago.
In a country known for coalition governments that rapidly fall apart, Kalvītis has been Prime Minister for last 3 years, since December 2, 2004. Latvia has had only one democratically elected Prime Minister, Ivars Godmanis, who served longer (from May 1990 to August 1993).
Both Kalvītis and Godmanis left the office deeply unpopular. In Godmanis case, it was the difficult economic transition from Soviet economy to market economy. The industrial production was falling by 30%/year and a lot of people were losing their jobs.
Kalvītis case is completely different. A few months ago, I came back from being abroad for many years and found a country that has changed for better. The Latvian economy has been growing at 11%/year. The inflation is rising, but people are spending more. The retail sales have been growing at around 20%/year (after adjusting for inflation), for most of Kalvītis' term. The number of Latvians leaving their country for better paid jobs in Ireland or UK is a half of what it used to be 2 years ago. I have my doubts about sustainability of those trends, but the problems with that have not started setting in yet...
Bill Clinton once famously said: "It's the economy, stupid". Kalvītis' government assumed that was the case. They were wrong.
With the economy improving, people start having other concerns. They start demanding more of their government. They have less tolerance for corruption. They become less willing to tolerate millions in government money disappearing through shaddy deals. Many of the people in Tautas Sapulce demonstration were not poor people who have been left behind by the economic boom. Rather, they were people who were comfortable in their everyday lives but wanted the government to do better. To be less corrupt and more helping to those in need. They did not want to have to say "My life is fine but the government sucks" much longer.
We will soon know who the next prime minister is. The government will probably be a re-shuffle of the current one. Kalvītis will take the blame for the past mistakes and the current coalition will attempt to make people believe that they have changed.
In a country known for coalition governments that rapidly fall apart, Kalvītis has been Prime Minister for last 3 years, since December 2, 2004. Latvia has had only one democratically elected Prime Minister, Ivars Godmanis, who served longer (from May 1990 to August 1993).
Both Kalvītis and Godmanis left the office deeply unpopular. In Godmanis case, it was the difficult economic transition from Soviet economy to market economy. The industrial production was falling by 30%/year and a lot of people were losing their jobs.
Kalvītis case is completely different. A few months ago, I came back from being abroad for many years and found a country that has changed for better. The Latvian economy has been growing at 11%/year. The inflation is rising, but people are spending more. The retail sales have been growing at around 20%/year (after adjusting for inflation), for most of Kalvītis' term. The number of Latvians leaving their country for better paid jobs in Ireland or UK is a half of what it used to be 2 years ago. I have my doubts about sustainability of those trends, but the problems with that have not started setting in yet...
Bill Clinton once famously said: "It's the economy, stupid". Kalvītis' government assumed that was the case. They were wrong.
With the economy improving, people start having other concerns. They start demanding more of their government. They have less tolerance for corruption. They become less willing to tolerate millions in government money disappearing through shaddy deals. Many of the people in Tautas Sapulce demonstration were not poor people who have been left behind by the economic boom. Rather, they were people who were comfortable in their everyday lives but wanted the government to do better. To be less corrupt and more helping to those in need. They did not want to have to say "My life is fine but the government sucks" much longer.
We will soon know who the next prime minister is. The government will probably be a re-shuffle of the current one. Kalvītis will take the blame for the past mistakes and the current coalition will attempt to make people believe that they have changed.
Tuesday, December 04, 2007
More numbers!
Opinion poll numbers, this time. The voting intentions of Latvians, according to Latvijas Fakti:
Right now... people's everyday lives are fine, the economy is great in short term (I have my doubts about medium/long term perspectives and I've written about those in detail on this blog... but the possible problems are not showing up in everyday life yet). Yet, the political elite looks progressively dysfunctional... and it's not like the opposition looks much better than the coalition, either (click here for the latest example of that).
In a weird way, it looks like what US is going through... people are fine themselves but a lot of them don't trust any side of the political divide... neither Bush nor Democrats.
Saskanas Centrs (Harmony Centre) 10.8%The most telling is this comparison:
Jaunais Laiks (New Era) 7.8%
ZZS (Farmers and Greens) 6.2%
Tautas Partija (People's Party) 5.1%
PCTVL 4.5%
all parties combined 48.8%One of our pollsters noted that we have not seen as big percentage of undecided voters since 1995. Back then, the main Latvian bank (Banka Baltija) was bankcrupt, people's savings were gone and country's economy was still in shambles after a difficult post-Soviet transition.
"would not vote" or "undecided/none of the above" 51.2%
Right now... people's everyday lives are fine, the economy is great in short term (I have my doubts about medium/long term perspectives and I've written about those in detail on this blog... but the possible problems are not showing up in everyday life yet). Yet, the political elite looks progressively dysfunctional... and it's not like the opposition looks much better than the coalition, either (click here for the latest example of that).
In a weird way, it looks like what US is going through... people are fine themselves but a lot of them don't trust any side of the political divide... neither Bush nor Democrats.
Monday, December 03, 2007
November real estate numbers
This is the monthly update on how the Latvian housing bubble is deflating. According to Latio real estate agency, the average apartment price in Riga in November 2007 was 1445 Euros/m2 which is:
The companies have different opinions on where it is going. Balsts and a few other realtors say that the rental prices are going up, because more people are renting instead of buying. That would make buying and then renting out profitable, thus stopping the fall in prices. Latio monthly report is skeptical about this argument.
- 3% less than in October 2007;
- 16% less than in April 2007 (when the prices peaked);
- 1.6% less than in November 2006 (this is the first month when we have a year-on-year decrease in prices).
The companies have different opinions on where it is going. Balsts and a few other realtors say that the rental prices are going up, because more people are renting instead of buying. That would make buying and then renting out profitable, thus stopping the fall in prices. Latio monthly report is skeptical about this argument.
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