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Artur Eresko → There was a time and prices were scaling down

Artur Eresko → There was a time and prices were scaling down

An abnormally warm autumn in Latvia and extremely favourable oil prices allowed the Latvian producers to scale down prices for their produce notably. That means to gain competitive advantages in external markets.


 

As they calculated at the CSB, in October 2015 as compared to October last year the producers’ prices reduced by 2.1%. Why?

Already now, at the close of November, it is absolutely obvious: autumn 2015 has become in Latvia one of ten warmest ones for all time of observations as from 1881. So, anyhow, the weather forecasters from the Latvian Environment, Geology and Meteorology Centre say.

Under such conditions the Latvian undertakings, rather thrifty as it was, considerably reduced consumption of heat, payment for which is the largest item of the production facilities, office maintenance costs. Subsequently, the manufacturers really saved this autumn and, consequently, scaled down the prime cost of their produce.

But this is far from being the only area for savings. The sharp fall in global oil prices entailed lowering in price tags at the Latvian fuel filling stations. In our situation, the fall in price for A95 petrol made more than 15% - from 1.20 euro to 1 euro per litre.

However, if to take the Latvian economics, then, of course, the biggest winners from unusually warm weather are, of course, the constructors. Commonly in cold weather the works are either discontinued or extra-budgetary resources for heating-up facilities have to be spent. This autumn the constructors without looking back at precipitation and in some directions managed to construct new facilities or repair old buildings almost two times as many as in cold years.

At the domestic level this phenomena is favourable from the unemployment point of view as well. Commonly the number of workers placed on enforced leave in autumn /winter period increases. But this does not happen now as confirmed also by the labour market statistics.

Interestingly also that drop in production of the Latvian goods oriented to the domestic market made up 3%, while the manufactured goods going for export became cheaper just by 1.1%. This can be explained by frozen demand in Latvia, which, in its turn, is entailed by careful psychology of a Latvian consumer, who has not forgotten the shocking consolidation of the specimen of 2008-2009, as well as by a pure physical reduction in the number of consumers, who emigrate from the eastern shore of the Baltic Sea to the western and farther.

It is fair to say that the CSB’s calculations are based on polling of just 640 undertakings, while in Latvia the number of commercial companies with the entry ‘Production’ in corporate charters is a hundred time bigger. Nevertheless, the figures of statistics in this particular case reflect the actual state of things.

 

Artur Eresko (Артур Ересько) - Candidate of Economic and Legal Sciences.

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