OREANDA-NEWS. March 26, 2014. The mood of entrepreneurs remained at an optimistic level in December 2013 – 51.26 points, the latest Citadele Index study, which is conducted by Citadele Bank in partnership with the SKDS market and public opinion research centre, has shown.

Similarly to the first three quarters of last year, the optimism of entrepreneurs shrank during Q4, when it dropped by 0.54 points. The level of optimism at companies with foreign capital, which have usually been most optimistic, has also declined, reaching the lowest level during the past two years during the last quarter of the year – 56.92 points. Experts believe that the influence of local entrepreneurs is on the rise, adding that they are the main driving force behind investments in Latvia.

When the index is above 50 points, that indicates optimism among businesspeople and when it is below 50 points that indicates pessimism.

Entrepreneurs in Latgale are more pessimistic than others – 49.59 points. Leaders of micro and small companies, which have that status because of their revenues, are similarly pessimistic – 49.30 and 49.56 points respectively. Representatives from microenterprises that have been one and nine employees have a mood index of 49.68 points. Entrepreneurs in the Riga metropolitan area spent nearly two years in the optimistic zone, but in the latest study they mood has sunk to 49.85 points.

Representatives of companies with foreign capital have also become more cautious. During the course of 2012, the optimism of such people was close to 60 points, but last year it gradually diminished. During the last quarter of the year, it declined by another 1.7 points to 56.92 points.

Citadele Bank’s senior economist, Zigurds Vaikulis, in discussing the role of foreign investors in Latvia’s economic growth, says that “until now, foreigners in Latvia have mostly been interested in so-called ‘infrastructural’ sectors – those that are focused on domestic consumption. This refers to banks, domestic retailers, the energy sector, and the real estate sector. The scope of foreign direct investment is expanding more slowly than was the case before the crisis, but a positive trend that should be emphasised is that there has been a comparatively larger flow of money toward processing industries that are focused on exports. Latvia is dominated by investors from Scandinavia, and there is also a notably large presence of registered offshore businesses.”

Latvian entrepreneur Guntars Kokorevics, who has purchased several foreign companies in Latvia and shares therein during the past six months, believes that local companies will become increasingly influential. He says that Latvian entrepreneurs have gained experience by working with foreign partners and representing their interests, and they are putting that experience to use in developing companies with local capital. Kokorevics also says that local entrepreneurs are convinced of their own abilities. Asked by foreign entrepreneurs are becoming less optimistic, he says that Latvia has a small market with low purchasing power, with ongoing emigration of Latvia’s residents. This reduces consumption, as well as opportunities to develop manufacturing because of a lack of workers.

The Citadele Index has eight sub-indices, and according the head of SKDS, Arnis Kaktins, “the value of most Citadele Index sub-indices declined toward the end of last year, with the value of two essential sub-indices sliding below 50 points – optimism about the profitability of companies shrank to 49.21 points, and optimism about economic activities declined to 49.67 points. Only two sub-indices increased a bit – optimism about competitiveness, where the index rose by 1.15 points to 58.53 points, and optimism about investments at the relevant company – up by 0.32 points to 53.02 points.”

In December 2013, the evaluation of the present time among entrepreneurs who took part in the Citadele Index study dropped to 50.88 points, with views about the future improved a bit to 51.64 points. This means that businesspeople are cautiously optimistic about the first half of 2014. The present index reflects the views of entrepreneurs about the present situation, while the future index relates to predictions about the next six months.

The Citadele Index
The Citadele Index describes the subjective views of Latvian entrepreneurs about the economic situation in the country, also asking them to make forecasts for the next six months in area such as overall economic activity in the country and in the relevant business sector. The Citadele Index is based on a survey of 750 companies’ directors in Latvia who represent firms of different sizes and in various sectors. SKDS conducts the survey once every quarter. The last one was conducted in December 2013.

About Citadele Bank
Citadele is a local Latvian bank, which offers banking, financial and asset management services. Citadele group is represented in the Latvian market as well as in 7 other countries. Citadele Bank is the only collaboration partner of American Express® in Latvia and Lithuania who is entitled to issue American Express credit cards. In 2012 the bank was recognized as the best governed state-owned enterprise in the Baltic States according to a study conducted by the Baltic Institute of Corporate Governance. Citadele’s vision is to become the most valuable local financial group in the Baltic States. 75% minus one Citadele Bank’s shares are possessed by the State Joint Stock Company Privatization agency on behalf of the Latvian State and the owner of 25% plus one share is the European Bank for Reconstruction and Development (EBRD).