Friday, July 25, 2008

Wednesday, July 23, 2008

Economic slowdown is starting to bite

One of strange things about Latvian economy was that, even as the economy started slowing down at the end of 2007, salaries continued to increase at 30-40%/year. It appears that this trend is now over. Our statistics office has not yet released the data on Latvian salaries in Q2 2008 but there is data from the tax office:

The graph above shows how the revenue from social security contributions is changing. Since Latvian social security contributions are a fixed % of person's salary (except for very high incomes), the average salary increase should be about the same. And increases have slowed down from about 40%/year to slightly less than 20%/year. The next graph shows the same data, adjusted for inflation (which has been steadily rising):
We are at a point when salaries are no longer increasing faster than inflation. And, given the trend, in a few months, they will be increasing substantially slower than the inflation. The economic slowdown is starting to affect almost everyone.

Also, at my work, I'm starting to get questions of the type "Do you have openings in your organization?". Just a year ago, it was organizations having to look for employees, not the other way around. Things are changing and labour market is getting tighter.

In short, the economy is starting to hurt and it will get worse. Given the scale of economic inbalances in Latvia'2007, this was inevitable. I'm only hoping that this recession lasts a year or two, not 5-7 years.

Thursday, July 17, 2008

Latvian song festival, a late recap

The 24th Latvian Song and Dance Festival is now over. It was the biggest ever - with 38,000 people performing. (That would be 1 out of every 60 people in Latvia on stage in some event - is there any other country that has festivals of this scale?)

We also had the biggest ever shortage of tickets to many of the festival events. The tickets for the closing concert were reportedly being re-sold at 10 times the face value. One humorist referred to that as "Song, dance and ticket-scalper festival".

I was lucky to get tickets to the opening concert - the one which got a lot of criticism afterwards. Myself, I enjoyed the concert - but not as much as some of the past Song Festival concerts. The feeling of being there with tens of thousands of other people and listening to a thousand-people choir was great. The traditional Song Festival songs, performed for 5, 10 or 20 festivals in a row, were good. But the attempts to insert something more modern into the Festival program did not quite connect with me this time.

There were several songs sung by Renars Kaupers of Brainstorm (the best known Latvian pop music band), with youth choirs in the background. I like Brainstorm but there are so many other opportunities to listen to it. Song festival is only once in 5 years and I would have liked to hear the choir more and Kaupers less.

There were also several songs composed for this festival - and they did not have the same success as the traditional favorites. But I certainly enjoyed the concert and would have gone to it again. And I understand the need for creative experiments.

In the closing concert (which I watched on TV), they went back to the traditional Song Festival repertoire and it sounded great. And every one of my friends and every critic liked it. And it was followed by the choirs singing together with the audience until at least 4am. I really wish I had been there...

UPDATE: In comments, Pierre points out that Estonian song festival has 34,000 perfomers - which would be one out of 40 Estonians performing. So, we are not unique. Maybe Baltics together are unique in this aspect. And, in any case, it's very impressive...

Sunday, July 06, 2008

People's Party and pragmatism in Latvian politics

Latvian sociologist Aigars Freimanis, about People's Party (the largest party in the current coalition) and its future:
Velkot paralēles ar "Latvijas ceļu", daudzi saka, ka TP tieši tāpat ir nogājusi sev nolemto varas ciklu. Man šķiet, ka TP tomēr ir zināmā mērā īpaša. Cilvēki, kuri tajā apvienojušies vai balso par TP, ir saistīti pragmatiskām saitēm. Tās ir daudz stiprākas nekā ideoloģiskās. Lūk, šis faktors rada to īpašo situāciju, kad cilvēki nospļaujas, lamā no panckām ārā, bet tik un tā atkal iet un nobalso par... Tautas partiju. Vienīgais risks, ja kāds uz vēlēšanām uztaisa līdzīgu veidojumu, kas no jauna spētu ieintriģēt pragmatiķus.
A loose English translation:
Many say that the time for People's Party is up. But I think they are somewhat special. People who vote for People's Party do it because of a stronger-than-ideology pragmatism. They swear about it but then they again go and vote for... People's Party. Their only risk is if someone else creates a similar organization, capable of captivating pragmatically minded voters.
I am one of those pragmatically minded voters myself and I've had difficult time deciding for whom I should vote next. To put it very softly, the list of flaws for People's Party (or anyone else in the coalition) is getting longer and longer...

But then when I look at the alternatives... The main idea of a large part of opposition these days is that if we somehow got rid of Skele, Lembergs and Slesers, Latvia would turn into a paradise on earth. New Era Party looks clueless about how they would govern, except for prosecuting oligarhs. Stokenbergs "Society for Different Politics" is turning into the Society of Promising Everything to Everyone.

Only Kalniete's Civic Union looks a bit hopeful. And there's two years and three months until the next election...

Tuesday, July 01, 2008

Even bigger austerity package on the way...

While I was wondering whether Latvian state finances are indeed in so bad shape that they need a 100 mln lat (140 mln euros, 0.6% GDP) of budget cuts, Latvian government decided on even bigger package of cuts. Our minister of finance now says that we should expect 250 mln lats (360 mln euros, 1.6% of GDP) of cuts!

My opinion remains the same as in my previous post. There's still no evidence of major revenue shortfall. So, we have the following possibilities:
  1. there's something very bad coming and I don't see that but the government does;
  2. the government is seeing something very bad that is not actually happening;
  3. the government is acting under behind the scenes pressure from IMF/EU/whoever else;
  4. the government has decided to use the situation as an excuse to cut the bloated Latvian bureaucracy.