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Positive changes in the Baltic economies

By Anatol Steven. 01.06.2010

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Adding to the chorus of voices that have been chanting the Baltic countries’ imminent recovery, the deputy governor of the Swedish central bank the Riksbank has stated that the three economies are quickly regaining competitiveness.

Lars Nyberg announced in a presentation of a report on Latvia, Lithuania and Estonia that the three economies are in “much, much better” shape than last year and that the region's housing markets may have bottomed out, with property prices being “near the bottom or even past the bottom”, underpinning what could be a solid recovery after a deep and damaging contraction.

The recovery in the Baltics has “come quicker than we expected,” Nyberg said. “They are clearly on the right path, as long as they don't mess it up politically.”
The Riksbank is responsible for monetary policy in Sweden with an objective to maintain price stability. As such, it makes regular assessments of risk levels in the major Swedish banks, which are heavily exposed to the Baltic economies, as well as in Sweden’s central financial infrastructure.

The Baltic states have suffered the European Union’s deepest recessions in recent history since a boom intensified by their EU accession in 2004 led to bust when their domestic retail sectors and property markets collapsed.

Since then, the Latvian, Lithuanian and Estonian governments have won praise for sticking to strict austerity packages that have restored investor confidence. Moreover, Estonia’s fiscal performance has achieved enough to put it on course to become the euro region’s 17th member from January 2011.

The Latvian economy has been forecast to decline by a further 3.5 percent this year, but signs it is now bottoming out are already being seen. The Lithuanian economy is expected to grow by 2 percent this year, according to the International Monetary Fund, while Estonia will also show slight growth.