OREANDA-NEWS. In 2007 the index of Latvian entrepreneurs' business activity has experienced an all time low with the value of the Parex index dramatically declining over the last three quarters. Since the beginning of 2007 the index has fallen by 6,51 points to 54.37 points, which, historically, is the steepest fall of Index and the lowest Index result since its introduction in 2004, reported the press-centre of Parex.

“Despite a pessimistic trend in the index's formation, the last quarter has brought some signs of stabilization, indicating that the fall in optimism has peaked and we believe that such a deep decline will not continue in the future. In the last quarter, the value of index closed only 0,83 points lower, and it did not cross the 50 points barrier, maintaining the overall optimistic evaluation of economic development”, - considers Normunds Vigulis, Vice president, Treasury, Parex banka.

The total value of the Parex index is composed of eight Parex index subindexes (assessment of the overall economical activity in the country, economical activity in the sector, competition in the sector, turnover, profitability, financial situation, number of employees and companies' investment volume).

In the third quarter 2007, overall economical activity in the country was evaluated most skeptically, showing a - 4,92 points decrease. It is the first time in the history of the index that this subindex has fallen below the 50 points mark (49,72), experiencing the steepest decline (14.6 points) during the first three quarters of 2007.

A decrease was also observed across the subindexes, which evaluate economical activity in the sector (-2,06), number of employees (-0,84) and competition (-0,43). Meanwhile, certain stabilization was noted with minimal rises in the turnover (+0,81), investment volume (+0,30) and financial situation (+0,17) subindexes. It proves that entrepreneurs still suffer from the lack of a skilled labour force as well as from rising labour costs, which is negatively affecting the forecast of further sector development. Nevertheless, they have started to adapt to the situation, looking at the overall financial situation of the company with cautious optimism and assuming opportunities for further investments.

Over the last quarter, the value of index has risen marginally in the trading sector (+0,37), thus outperforming the construction industry, which had previously dominated, but which saw optimism fall in the third quarter of 2007 (-2,62). The optimism of construction companies has diminished for the third quarter in a row reaching an historical low, since 2004, of 53,88. The evaluation of economical activity of construction sector has also become more pessimistic this quarter, dropping down to 49,2 points, which is an extremely low evaluation of industry. In the third quarter it only fell by 9,51 points.

Significant changes are seen when looking at companies by origin of their capital. For the first time in the history the Parex index, companies with foreign capital (57,20) are evaluated below the companies with local capital (57,45). Previously, companies with foreign investment have always achieved a higher rating. It must be noted that enterprises with foreign capital look at the overall economic activity in the country with much less optimism, with index comprising only 47,96 points (-8,21).

Evaluating the regions, entrepreneurs in Latgale Region have become slightly more optimistic (+0,61), while all the other regions show all-time lowest index results. The most notable fall was observed in Zemgale Region (-4,06), at only 52,87 points.

The past quarter was not successful for large enterprises. In the third quarter the steepest index decline was noted in the enterprises with 250 employees or more (-3,19), with turnover from Ls 300,000 – 1 000,000 (-3,72) and with the turnover over Ls 1 000,000 (-3,91).