Mārtiņš Āboliņš, Citadele Bank Economist
After two very strong years of growth, when economic growth sometimes even exceeded 5%, economic growth in the Baltics is expected to moderate under the influence of increased headwinds from the global economy.
The largest risks to the development of the Baltic region this year are linked with the external environment. Since the second half of last year, in almost all of the world’s largest economies, manufacturers’ outlook has significantly worsened, and global trade has seen its largest fall since 2009.
Despite the less than promising trends in global manufacturing, as well as the fall in manufacturing volume elsewhere in Europe, the development of the manufacturing industry in the Baltics continues to progress. In all three Baltic countries, growth in the manufacturing industry in the first quarter of 2019 was between 3.5-5%. This may show that, despite the growing workforce deficit and high wage increases, Baltic manufacturers are still sufficiently competitive.
The internal economic cycle of the Baltic countries currently seems acceptably stable. Consumption is growing steadily, however, and in construction, there are an increasing number of signs pointing towards the industry being on the point of overheating. In this construction cycle we are probably close to the highest point, although there are differences between the Baltic countries, and construction in Lithuania in the first quarter of the year has continued its powerful growth.