Overview of the Baltic Economy.
Mārtiņš Āboliņš, Citadele Bank Economist
The world economy is slowing down and signs of a possible recession are increasing
After two very good years in the global and the Baltic economy, the situation in the global economy has changed significantly in 2019. The good news are that current industry and trade data are still far from the levels where we should worry about serious crisis.
Growth in the Baltics is slowing down
As the global growth slows down, economic growth in the Baltics is decelerating, but compared to the euro area as a whole, growth rates in the Baltic region remain very good. In the second quarter GDP in Lithuania grew by 3.9% in and by 3.6% in Estonia compared to the previous year, while GDP in Eastern Europe increased by 3.5%. At the same time Latvia's GDP grew by only 2.0% in the second quarter, which is the slowest rate economic growth in the last 3 years.
Industry is feeling the slowdown in the global economy
Baltic manufacturers are beginning to feel the slowdown in the the global economy, but manufacturing sectors in the Baltics are doing better than elsewhere in Europe. In July, manufacturing output in Latvia increased by 1.3% compared to July 2018, while in Estonia it increased by 2.5% and in Lithuania by 4.7%.
Warm labour market boosts consumption
Although Baltic region is growing slower this year than in the previous two years, it has not yet affected workers and wages in the Baltics continue to increase rapidly. In the second quarter of this year, the average wage in Latvia increased by 7.8% compared to the previous year and reached 1083 euros before taxes. Meanwhile, in Estonia, average wage grew by 9% and in Lithuania by 7.9%, reaching 1419 and 1266 euros, respectively, before taxes.