Russian-Ukrainian conflict impacts Latvia’s business environment

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Q1 2014 has confirmed the predicted growth of global economy: last year’s growth of 2.6% was followed by 3% growth this year. It is expected to reach 3.3% next year. Eurozone continues to slowly but steadily recover from the crisis. In spite of natural disasters at the beginning of the year, the USA demonstrates dynamic and balanced economic growth; its outlook for 2014 is 2.7%.

Latvia’s dependence on gas supplies from Russia has affected the country’s business environment. Financial analysts explain this with geopolitical tensions in Ukraine, which may impact trust levels of Eastern European market members.

“We do not yet feel the slowing of business activities in Latvia. It is quite the contrary – we see business activity becoming livelier, especially in construction and food industries. The situation in Russia has forced the majority of enterprises to seriously consider business risks. It has also doubled companies’ interest towards insuring transactions made with Russia,” says Coface Latvia Sales and Marketing Director Sandra Smiltniece.

Germany and Austria needed five years in order to come back to risk assessment level A1, thereby reaching the same level as USA, Japan and Switzerland. Germany has proven its role as “Europe’s engine”, demonstrating a very balanced growth (2% for 2014 after 0.3% in 2013). Austria’s business development is improved thanks to low interest rates and the recovery of Germany, America and Eastern Europe.

The rating of the United Kingdom has been upgraded to A2. The outlook for 2014 is 2.7%; economic growth may be as dynamic as that of USA and may be even higher than Germany’s development rate (2%). Another positive example of economic growth in Europe is Spain, which was hit by the crisis very hard: Spain’s B rating has been upgraded with positive development outlook (1.2% in 2014 and 1.7% in 2015).

Coface business environment assessment is compiled from multiple factors: a country’s political, economic and financial position, solvency and development of the business environment. There are seven levels: A1, A2, A3, A4, B, C and D.

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