- Patrick Young
- Swedbank Sees Deeper Economic Contraction, Risk of Deflation in Baltics
- www.bloomberg.com
Summary
The Baltic economies are facing incredible challenges. However, their size and flexibility cannot be under-estimated.
Analysis
In a world where chaos can be found on every continent in some shape or form, the simple truth is that the media are keen to relate just how dreadful things are elsewhere.
Certainly, the Baltic states are going through an incredibly turbulent time and the risk of political unrest is considerable. However, the situation on the ground needs to be understood better than the global media’s recent portrayal of a riot-strewn heartland!
Yes, the Latvian economy may contract by 10 percent and the other Baltic states may have less but none the less eye-watering declines in their economies this year. However, look on the ground at the core value proposition and what you can find is a remarkably business-oriented regulatory system and a very strongly educated multi-lingual workforce.
Drive from the (rather poor) north eastern corner of Poland past Russia’s Kaliningrad outpost to the Baltic states and suddenly you will find yourself in something that is highly proximate to a developed nation. The Baltic states have shone brightly and developped in a manner that even surprises its own residents. Now the economy will drop back to a slightly lower level but nonetheless it will still be significantly higher than anybody really expected to see within 20 years of the collapse of Soviet Communism in the area.
With the flexibility provided by being small states, the Baltics have a great deal to play for and while liquidation bargain hunting may be in vogue for investors during 2009, don’t be surprised to see the Baltic Icarus start flying once again after a dizzying drop from the ionosphere back to the troposphere…
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