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Eresko Artur · Very good GDP. But small

Eresko Artur · Very good GDP. But small

Economic austerity over several years never brought the Baltic States to the rapid growth of prosperity. What then these suffers for?


Indeed, the strict fiscal policy in the Baltic States after the recession of 2008-2010 resulted in the lowest government budget deficit and debt in the European Union. The belt-tightening has resulted in that the Baltic States along with Luxemburg, Denmark and Slovakia are among few (six out of EU - 28) member states of the European Union, which can fulfil all Maastricht criteria.

The Baltic States managed to demonstrate significant improvements in competitiveness as evidenced by high ranking by the Global Competitiveness, Ease of Doing Business ranking and Economic Freedom ranking. In general, Latvia, Lithuania and Estonia today (if compared with the situation during pre-crisis period in 2005–2008) are prepared well enough to survive any internal or external economic shocks.

Despite this, the GDP growth rates are lower than the governments and population of three republics would like.

Thus, in the 3rd quarter of 2016 GDP in all three Baltic States would grew lower than of indices of the eurozone. As a result a low economic growth would demand from the government more activity and targeting to limit as far as possible potential damage to the economic development in the long run. As far as Latvia is concerned it is hard to talk about targeting and predictability — it is enough to recall disputes around micro-enterprise tax, as well as months-long epic with elections of heads of such key agencies as State Revenue Service and Corruption Prevention and Combating Bureau.

Over the last decade the Baltic States have approached the average level of the European Union from 54% in 2005 to 72% in 2015. However, the speed of levelling of the living standard declines since the movement from low indices is fast just in the beginning, but in the long run it becomes more and more difficult to ensure growth, which is materially overtaking the average index across the European Union.

Among new challenges in 2017 we need to mention return of inflation, which shall be contributed by events in the world primary commodity markets – first and foremost, the emergent raise in prices of oil and petroleum products. The acceleration of raise in prices up to 2–3% would require the government higher indexation of pensions than in 2016, when supplementary made up 1.86%.


Artur Eresko (Артур Ересько), candidate of Economic and Legal Sciences.

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