Brilliant and professional look at the current economical situation of Latvia. Kārlis Cērbulis is one of the bright economical minds in Latvia and collegue of mine in the economist association "EA2010" Enjoy!
1. We are alive! Now what?
Source: The Economist
K. Cerbulis (karlis@nchriga.lv) March 2010
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2. My only prediction:
The global economy in the next 20 years
will be more challenging/ volatile than
the previous 20 years.
Can we still be successful?
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15. Total Debt (% of GDP)
2009 estimate
450%
400%
350%
300%
250%
200%
150%
100%
50%
0%
Latvia Estonia Lithuania Germany Finland Spain UK USA
Source: World Bank, Eurostat 15
16. Total United States Credit as % of GDP
Baltic States
regain
independence
Source: www.growthology.org 16
17. Budget Deficit (% of GDP)
0%
-2%
-4%
-6%
2009
-8% 2010*
*estimate
-10%
-12%
-14%
Latvia Lituania Estonia Germany UK USA
Source: World Bank, Eurostat 17
18. USA Federal Budget Balance (% of GDP)
Source: Nordea Economic Outlook January 2010 18
19. New Bubbles?
• Bank assets in China + 28% in one year.
• Apartment prices in Bejing and Shanghai +50%.
• Price of land in China + 106%
Shanghai + 200%, Guangzhu 400%
Sounds familiar?
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20. We are experiencing a “non-linear” event,
such as: a meteorite striking the Earth...
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22. Like the one that killed off the dinosaurs...
“Prediction is very difficult, especially of the future.” Niels Bohr
The world will be very different than before the crisis.
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24. Latvia Reacts Quickly
Current Account (% of GDP)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Source: Bank of Latvia * Provisional data 24
25. Retail Trade (growth % YOY)
60%
40%
20%
0%
-20%
Retail turnover
-40%
-60%
Registration of
-80%
new vehicles
-100%
Source: Latvian Association of Authorized Car Dealers, Central Statistical Bureau 25
26. Three Laws in Real Estate:
„Location, Location, Location.‟
Distance (km)
to Riga from:
London: 1,662
Berlin: 846
Moscow: 835
Stockholm 437
Helsinki: 360
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27. „Swedish Occupation I‟
Estonia and Latvia (1629 – 1700)
“Positive times, during which this period also
acquired fame as golden times.”
Wikipedia
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30. History of “Big” Crisis
• The „Great Depression‟ lasted 11 years
(it ended only with the beginning of World War II) .
• 1970‟s USA crisis lasted 9 years.
• Japan‟s „deflation spiral‟ lasts more than 20 years.
The crisis is here to stay for a while!
It will change and shift form.
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31. Expect Economic Volatility
the next 10+ years
• How to survive changing times:
– Live modestly
– Borrow less (as a country, as individuals)
– Export more than import.
Live like a „frugal family‟ would.
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32. Would New Lending
Solve Everything?
Nej tack!”
(“No, thank you!” in Swedish)
Only fast credit write-offs provide a
solution.
(“When gross external debt exceeds 90% of
GDP, annual growth rates are cut in half.” )
Reinhart & Rogoff
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33. Set Clear Targets:
• Budget without deficit ASAP.
“Be more Estonian than the Estonians!”
• Fast, effective bancruptcy procedure for
individuals and companies.
• Encourage lending to companies,
hinder consumer borrowing.
• Rapid reform of pension system.
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34. “It is not the strongest of species that
survives, nor the most intelligent that
survives.
It is the one that is the most adaptable to
change.” Ch. Darwin
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