We continue publishing extracts from replies and interviews of the Bank’s top-management circulated in the press on Christmas Eve and at the beginning of this year. Some comments to the mass media were given by the Member of the Bank’s Council, Alexander Kalinovski.
About the Situation in the Latvian Economy “Signs of stabilisation are obvious here. This is largely caused by the fact that the panic attitude, which was dominating the market some time ago, has settled down and has given way to a more realistic assessment of the situation and pragmatic actions.
Painful but necessary reforms are being implemented in the country aimed at the budget consolidation and deficit reduction. One can argue whether these measures are sufficient and whether accents are put correctly, but this very fact is undoubtedly positive.
With regard to private businesses, the crisis has caused the restructuring of many companies and has made them work more efficiently, focusing precisely on the priorities and refusing grandiose, but currently unrealistic plans. Due to this, Latvian enterprises have generally become stronger and more stable in the crisis economy events today than 2-3 years ago.”
About the Situation in the Banking Sector “The situation is also stable and predictable in the banking sector. Obviously, the most complicated period is already left behind. Basic accumulations on problem loans have been made; the banks, which needed this, have increased their capital base.
Now it is clear that the total losses of the banking industry, according to the results of this year (2010 – ed.), will be less than last year, including, due to the fact that a part of the earlier made conservative accumulations for loans were later re-estimated with account of the actual economic situation. And, although in absolute figures the losses are still very serious and the bad debts issue remains on the agenda, the situation instils cautious optimism. The growth rates of accumulations are going down and the scale of problems the banks tackle today is considerably less than a year or two ago.”
Outlook for the Latvian Banking Sector “It can be assumed with a high degree of probability that in the first half of the year loan write-offs will continue, but at much less moderate rates than before. According to the 2011 results, the cumulative performance of the banking sector can be either slightly negative or break even.
Having solved the current problems, a part of the banks will resume crediting, but it will not be that aggressive and easily accessible, as during the recent credit boom period.
The banks operating in foreign markets, including Rietumu Bank, will continue the policy of attracting deposits of non-residents. The new Latvian immigration legislation will largely contribute to this process.
Among foreign financial conglomerates, it will be Scandinavians who will retain the largest interest of our market.
The actions undertaken by the Scandinavian banks on the recapitalisation of their affiliated companies in Latvia are the evidence of their long-term plans. In such a situation, appearance of new players in our relatively small banking market is very doubtful in the foreseeable future.
And precisely the Scandinavian banks, which are already represented in Latvia or the ones which have been considering such a possibility for a while, may be pointed out as the most obvious bidders for purchasing the Citadele Bank.”
Major Events of 2010 “We have to specifically note the adoption of amendments to the Immigration Law which allow foreign investors to obtainaresidence permit in Latvia, i.e. in the EU. This law is a pattern for Latvia in many parameters and presents an example of the sanity of its legislators: it is absolutely clear who this law is intended for, how it operates and what benefit in the form of investments it will bring to the country’s economy. I think that the potential of this law will be fully displayed in the next two or three years and it will bring considerable benefits to our economy.
Another momentous event is the official visit of the President of Latvia to Russia – the first one ina long time. This is further evidence of strengthening the healthy pragmatism tendencies among our political elite for which we have to thank, among other things, the economic crisis. From the point of view of business, which up to now had to forge economic ties with Russia often in spite of the political relations, this is one of the best pieces news in the last year.”
Outlook for 2011 “This year for Latvia must become the time of reconsidering the state economic policy. It is necessary to elaborate on a clear conception of the country’s development and to determine the priority industries our economy will be based on.
The tactics directed at survival, reductions and cuts, which we were following during the recent years, must give way to growth-oriented reasoning. It does not at all mean that we have to increase the budget deficit or the state machine – the measures directed to budget consolidation must be continued, but it should not blur the perspective.
This year must become the period of critical decisions on the issues of state ownership of commercial assets. Obviously, decisions will be taken on privatising some state enterprises and facilities. Transfer of non-core assets into private hands will allow attracting of long-term investments and reducing the budget load.
Positive tendencies will continue in the banking sector. The majority of the banks, having recovered after temporary difficulties, most probably will again pass to the active development strategy. One can definitely say that all commercial banks already have clear plans of their further activities with account for the economic situation.”
Improvement of the situation in the European economy must also exert a favourable impact on the position in Latvia.”
Eleonora Gailisha Mass Media and Public Relations
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