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ECONOMIC DEVELOPMENT

ECONOMIC DEVELOPMENT. V.Dombrovskis Minister for Economics 30.05.2014. Content. Economic development – main i ndicators Main improvements in key policy areas Policy priority directions for up-coming year. Economic development – main indicators. GDP growth rates among highest in EU.

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ECONOMIC DEVELOPMENT

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  1. ECONOMIC DEVELOPMENT V.DombrovskisMinister for Economics 30.05.2014.

  2. Content • Economic development – main indicators • Main improvements in key policy areas • Policy priority directions for up-coming year

  3. Economic development – main indicators

  4. GDP growth rates among highest in EU 2013 compared to 2012, % %, 2000 = 100 EU average0,1% Data source: Eurostat

  5. Economic model has been changed – main driver export 2000 = 100 +24,2% -14,6% Source: CSB

  6. Export Structure ByGroupsofCountriesin per cent ByGroupsofGoodsin per cent

  7. FDI Structurein Latvia By Groups of Countries, million LVL, at the end of the period 4159

  8. Competitiveness has increased due to decreased labour costs and increased productivity 2000 = 100 -12,6% +9,1% Data Source: Eurostat

  9. Labour supply and demand • Unemployment rate • 2007 – 6.1% • Unemployment rate • 2020 – 6.4% • Unemployment rate • 2010 – 19.5% • Labour demand will continue increasing in the medium term, however, it will be more moderate • At the same time, labour supply will decrease • From 2016 the shortage of labour will be critical

  10. Transition to higher value added activities needed Structure of manufacturing by technological level(in 2013, %) Latvia Sweden, Denmark, Finland • Economic advantages of Latvia are mainly in cheap labour and low technology sectors • Rise of labour costs is inevitable due to increasing economic activities and open labour market conditions • Latvia can loose competitiveness in a low segments faster than gain advantages in production of products with high value added • Structural reforms are needed to facilitate transition from low to medium-high and high technology sectors

  11. Key policy areas

  12. Keypolicyareas Insuring macroeconomic stability • Accession to EURO zone on 01.01.2014 • Stability report for 2014 -2017: defines general government budget balance % of GDP • Invitation to start accession process to the OECD on 30.05.2013. - expecting to finalize accession process within two years Transformation to higher value added economy • National Industrial Policy & Smart Specialization Strategy sets directions of support for innovation, economic transformation towards higher added value, productivity and more effective usage of resources • Education guidelines for 2014-2020 strengthens capabilities in STEM fields and collaboration between entrepreneurs and education institutions

  13. EDUCATION REFORMS Higher education • Increase of education supply in STEM study fields • Internationalization • Functional and geographical consolidation of resources, strategic specialization Secondary and secondary vocational education • To change the share of the number of students in vocational education and secondary education in favour of vocational education to 50/50 by 2020 (33/67 in 2010; 39/61 in 2013) • Modernization of vocational educationis being implemented and work-based learning elements are being developed Lifelong learning • To ensure that 15% of the population (aged 25–64 years) would be continuously involved in the learning process by 2020 13

  14. Doing Business in Latvia

  15. Baltic states in Doing Business 2014 Reforms in areas with lower index: • Construction: Adopted new Construction Law (in force from 01.10.2014.) • Electricity: Introduced favorable conditions for industrial users • Paying taxes: Improved functionality of Electronic declaration system • Investor protection: Introduced new e-service «Rapporteur on changes applied at Commercial Registry’ data»

  16. OTHER REFORMS/MEASURES • Judicial Reforms • State-owned Enterprise Management • Timelystartof 2014-2020 EU Fundsplanningperiod • Gas/Electricity Market liberalization/interconnections/energy efficiency 16

  17. Energypolicymeasures

  18. Latvian long-term energy strategy 2030 – competitive energy for society • Long-term objectives: • Competitive economy – balanced, efficient, economically, socially, and ecologically justified energy policy • Sustainable energy – reduced dependency on imported energy resources, new and efficient technologies for the use of RES, measures to improve energy efficiency • Secure supply – stable energy supply and developed infrastructure • Creation of an integrated and competitive energy market means competition on the supply side, competition on the demand side: «market opening»and ensuring effective, transparent and non-discriminatory third party access (‘TPA’) to infrastructure

  19. Liberalization of energymarket • Intension to open electricity market on 1January, 2015, when also households will become market participants • Law «Amendments to the Energy Law»which has been adopted by the Parliament on 20 February 2014 provides that: • third-party access to the Latvian gas supply system including LNG system shall be granted and managed from 4 April 2014 • starting 3 April 2017 all natural gas users will have the right to freely choose a natural gas trader • unbundling of distribution system operators shall be completed by 3 April 2017 • unbundling of transmission system operators shall be completed by 3 April 2017, if not the earliest occurrence of one of the following circumstances: • Latvian natural gas system is directly connected to the interconnected system of any Member State other than Estonia, Lithuania and Finland; • the share of a main supplier in the overall consumption of natural gas of Latvia is less than 75%

  20. Energy projects of common interest of strategic importance for Latvia – Electricity • KurzemeRing-Internal line between Ventspils, Tume and Imanta (third stage) Provisionary budget planned: EUR 127.42 mln, expected EU co-financing: 50% • Third Latvian-Estonian transmission network interconnection Provisionary budget planned: EUR 112 mln, expected EU co-financing: 75%

  21. Energy projects of common interest of strategic importance for Latvia –Natural gas I Regional projects of strategic importance: • Poland-Lithuania natural gas pipeline project GIPL • Estonia-Finland natural gas pipeline project BalticConnector • Klaipeda-Kiemenaigas pipeline project

  22. Energy projects of common interest of strategic importance for Latvia – Natural gas II: LNG terminals • Latvia: National or regional LNG terminal In Riga (provisional costs EUR 583 mln, 50% co-financing by the EU), or in Ventspils or Skulte (provisional costs: EUR 101.2 mln ) • Estonia: Paldiski regional LNG terminal • Lithuania: Klaipeda LNG terminal • Finland: Inkoo regional LNG terminal or Muuga regional LNG terminal • Poland: Swinoujscie LNG Termina

  23. Thank you!

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