Latvia, like the rest of Europe, is suffering the still-going consequences of COVID-19 measures, all of which directly affect the economic well-being of the country and its regions. it.
SMEs are particularly affected because the government has not yet developed a support system and the support criteria do not allow all firms to apply for state subsidies.
It should be noted that the crisis in Latvia did not start in March 2020 but at the end of 2019. The decline in GDP is related to the decline of the shipping and manufacturing sectors. Crisis or disease has become the perfect cover for the country’s lack of an economic development plan.
Experts say that the government’s inadequate and purely economic governance has led to the simple fact that the economic crisis will continue, and a stronger wave is waiting for us. The government is not ready for the second wave of COVID-19 and the third wave is coming and we are not ready yet again.
Latvia is special in that we do not try to impose limited measures to save businesses operating in other European countries, but we come up with our own illogical measures that are ineffective and We find that the number of cases is increasing. The right and reasonable measures will help to return to a normal life, and this will enable the business to operate effectively and thrive.
In most other countries, except Latvia, the government has tried to support and prevent a decline in consumption by their own people, thereby supporting production. In Latvia, an unfortunate measure of banning the trade of certain products resulted in the shutdown of production. This ultimately reduced tax revenues to the state treasury by 18.5%.
The white flags in shopping malls represent declining sales and the safety factor is running out. Businesses, due to the restriction of not being able to sell seasonal goods, have not received working capital to purchase new products. The government has been slow to recognize an opportunity to support businesses by allocating money to working capital that can be used to pay rent and pay utility bills.
Political bias and economic well-being, you can’t have both
At the same time, the current authorities do not take any measures against the state economy or reject non-priority projects. If we compare with other countries, the cuts in government officials start everywhere. In Latvia, the number of officials has not decreased, even there is a decrease in the number of jobs. From every € 1 tax paid to the treasury, € 0.15 is spent on the maintenance of the state apparatus.
At the same time, during the application of measures COVID-19, Latvia turned out to be one of the leading countries in the policy of sanctions that endanger business activities. For 30 years, Russia and Belarus used Latvian ports. Objectively, for central Russia and Belarus, our top three ports, Ventspils, Riga and Liepaja, are more profitable than Russia’s Ust-Luga. Lower tax rates from 25-30%, faster customs clearance.
However, after years of rhetoric against Russia, as a result Russia refused to work with Latvia. The Kremlin used its administrative resources and the cargo was diverted to bypass the Baltic states.
Currently, we have lost our banking business, as well as transit and trade, with neighboring countries Belarus and Russia. Therefore, the economy becomes the hostage of politics. China has hope, but scientists are ringing alarm bells and noting that a slowdown in the Gulf Stream, which could invalidate all attempts by Russia and China on the northern sea route.
China has a famous project “One Belt, One Road”. Beijing is ready to work in both Latvia and Estonia, but according to US policy, the Chinese are not allowed into the Baltic. Now, after the investment agreement between the EU and China is broken due to the Uyghur problem, there is no need to wait for investments from China. As a result, due to political issues, the port complexes – which were still one of the most promising areas in Baltics only a few years ago, are currently at stake.
At the city or city level, the situation is the same as at the state level. My hometown Jelgava has 800 years of history and development. Twenty years ago, European quality minibus was produced and one of the largest sugar mills was in operation.
In the late 1990s, the RAF plant, with 4,000 employees was liquidated, and in 2006, Jelgava “cukurfabrika”, produced sugar for the country and for export; job provision and agricultural development; participated in the planting of sugar beets, has been closed.
Political elites yield to the EU in exchange for positions and foothold in the Brussels apparatus. Now, Latvia buys sugar from Denmark. In 2010, a major investor in railroad car production came to Jelgava, but political interference once again prevented the initiation of large-scale production in the city, despite the financial investment. into Jelgava with the entire annual budget of the city. . This time, investors come from neighboring Estonia, but politics also intervened here.
The volatile 2020 year has shown us that things are not changing for the better. In addition to the punitive war with Russia and China, a “vaccine war” has been added. At the same time, the old national political base continued to live by the principle of “the state is ours”, prioritizing its own interests, not the country’s economy.
I would like to note that the COVID-19 measures demonstrated the weaknesses of the EU. Recently, the European Commission has diversified its procurement of vaccines by giving back to Member States – each country having the right to purchase that vaccine independently.
What will happen next? If the EU cannot solve the important issues, maybe we, the 27 independent countries that make up the bloc, need more autonomy in economic matters, especially when implementing national projects and change the lines of political groups. is badly flawed in trying to effectively deal with the economic and socio-political crisis caused by the pandemic.