Post-referendum notes

The Latvian referendum season is now over and the country is moving on to other exciting things... like over government trying to decide how to cut 1/5 of all programs in 2009 budget, while spending 2.5 mln lats (3.5 mln euro) on renovating president's residence. As usual, everyone is outraged but that doesn't change anything.

The conclusions from the pension referendum:

1. People don't always vote for more money. Before the referendum, I made a parallel with Hungary which had a referendum on fees for doctor visits and university education this spring and voted for free services, overwhelmingly. Latvia looked like the exact parallel: government saying "The government can't afford that" (higher pensions, in our case), opposition saying "Not it can". The difference was that there was more at stake. The Hungarian fees were quite symbolic, the Latvian pension increase more substantial. Both as a benefit to people and as a cost to state budget. Yet, Latvians did not show up for the referendum. Why?
   
2. The government stepped forward. As I described in my previous post, the government did come up with its own pension increase plan, which gave roughly 1/2-2/3 of the increase promised in the referendum proposal. The retirees deserved an increase and they got one, although a smaller one.
   
3. Quiet campaign. Unlike with the Constitutional referendum (where I got bombarded with "Dissolve the parliament" message from every billboard and TV ad), this campaign was much quieter. It felt as if many of opposition's parties had quietly agreed that increasing pensions more would indeed increase the already-growing-due-to-recession budget deficit by too much. Some of them stated "We support higher pensions" in one or two interviews but did not really attempt to campaign and make sure that people show up for the referendum. Even Stokenbergs' Society for (not so) different politics spent more than 100,000 lats to advertise for gathering signatures in favour of holding a referendum and less than 10,000 lats to advertise for the actual referendum. Did they disbelieve the proposal, as well?
4. Referendum fatigue. This is the third referendum in 1.5 years, with the previous two (security laws and Constitutional changes) having no result. There's some point at which people's attention starts to turn off. Latvia may beyond that point.

With referendums over, the Latvian politics looks like it used to be. The government is unpopular and so is the opposition. If they hoped for some political gains, they were wrong. Except for ethnically Russian parties, everyone else in the opposition is now at 2-3% range in opinion polls. More than 50% of Latvians are undecided or not going to vote, and that number has been slightly increasing in the last few months.

Latvian pensions referendum is failing

Today is the referendum on a major increase in Latvian retirement benefits. Here is part 1 and part 2 of the background on the referendum, that I wrote a few months ago.

As usual with Latvian referendums, people opposed to the referendum proposition are skipping the vote, to push the turnout below the legal threshold at which the referendum is valid. So, the result will be 95%-99% "yes" but the real question is the turnout.

For the law to pass, the turnout must be at least 1/2 of the turnout in the most recent parliamentary election. That means that we need 453,730 voters, which is 30.65% of all eligible voters, for the vote to count. According to the Central Election Committee, we have:

• a turnout of 0.59% in the first hour of voting (7am - 8am);
• a turnout of 9.50% in the first 5 hours (7am - noon).

If the distribution of turnout over the day is like in previous referendums, this is insufficient. The 7am-noon turnout was:

• 41.8% of the final turnout in the Constitutional referendum a few weeks ago;
• 40.7% of the final turnout in the security laws referendum of 2007;
• 37.7% of the final turnout in the parliamentary election of 2006;
  
• 43.8% of the final turnout in the referendum on Latvia joining EU in 2003.
  

Right now, we have a noon turnout that is 31% of the necessary one. Either we have a huge number of procrastinating voters (myself, I'm still thinking whether to vote "yes" or to skip the referendum for an effective "no" vote) or (more likely) the referendum is on its way to failing.

The next update on turnout is at 4pm. In previous referendums/elections, 4pm turnout was 69%-74% of the final one. 69% of the necessary 30.65% is 21.33%. If we are substantially below that at 4pm, we can be quite sure that the referendum has failed.

UPDATE (9:30pm): 8pm turnout numbers are out and, with only two hours left in voting (8pm-10pm), the turnout is 21%. It's now safe to say that the turnout is not going to jump to 30.65% in two hours. The referendum has failed.

UPDATE (3:00am): the turnout is 347044 or 23.45% of eligible voters. Everything has been counted, except for 4 voting places in Latvian embassies in America (due to time-zone difference), which should not affect the number much. Again, the referendum has failed and by a substantial amount. I will have a post-referendum post tomorrow.

Latvian GDP, Q2 2008

Flash estimate of Latvian statistics office shows that Latvian GDP grew 0.2% year-on-year in the 2nd quarter of 2008. This was slightly weaker than 0.4% predicted by a panel of 10 experts for Bloomberg and slightly better than what I expected (I thought we will see a negative number in Q2).

Since we are at a rapid turning point, quarterly data might show the trends better. Quarter-on-quarter, the economy grew 3.2%. However, the 1st quarter is economically slow every year and the 2nd quarter always shows big growth number compared to the 1st quarter.

Here is a rough seasonal adjustment:

• over last 5 years, the average quarter-on-quarter economic growth in Q2 has been 6.1%;
• throughout the year, the average quarter-on-quarter growth is 2.3%;
• thus, economic growth is by 6.1-2.3=3.8% faster in the 2nd quarter.

Subtracting that 3.8% from 3.2% growth rate gives a seasonally-adjusted growth of -0.6% compared to the previous quarter. It's better than -1.9% that we saw in the 1st quarter (using the same methodology). But Latvia is still, very clearly, in a recession.

If the trend continues, the Q3 will have a year-on-year GDP "growth" of around -3% and, for the entire year 2008, it will be around -1%.