Looking at the Bank of Latvia's quarterly balance of payments bulletin, these seem to be net FDI figures, balancing an inflow of "equity and other capital" of LVL 149.9 million in Q1 2009 (up from LVL 143.9 million a year earlier) against losses by "direct investment companies" of LVL 133.4 million.
A bit confusing, maybe the real economists reading this can comment. To me it looks like FDI is falling, although investment inflow (according to Bank of Latvia) is slightly up. Netting against losses, it seems we are talking about some kind of a burn rate here, but then, the net for Q4 was negative. Is that better? Or simply a case of getting less, thereby burning proportionally less?
The BoL's Q4 report is not very enlightening, it states that FDI for all of 2008 totaled LVL 542.5 million, down 45.3 % from 2007. Whatever it is, it does not somehow look good. Add to that the statistically not very significant but symbolically damaging lowering of the Swedish flag-of-approval in the sale of the media companies Diena and Dienas bizness by media flagship Bonnier Business Press and you have reason to think that Scandinavian investors will shun new investment, if not start a slow retreat from Latvia. After all, the prestigious Bonnier flag still flies (with priority) in Estonia, Lithuania and reputed bandito-land Bulgaria's media scene. And do not Swedish/Scandinavian investors do as do their leading business media (Dagens industri, the mother of all East European business media but its recently abandoned Latvian daughter, as European languages formulate it)?
Cumulative FDI stood at LVL 5.607 billion in Q1 2009 , down from 5.66 billion in Q4 2008 but up from LVL 5.391 billion in Q1 2008 (due to an inflow of FDI during the first three quarters of 2008). Good or bad?
1 comment:
What’s good is that despite the losses investors are not leaving in large groups, therefore they seem to see some return from wait-and-see what happens. Since most of investment lies in banking, real estate, and retail and wholesale sector, we might see some major investment declines in the next few years. That said, the foreign investment that matters most, i.e. manufacturing (which currently makes up only slightly over 10% of total), depends more on the circumstances in export markets, given that expenses (labor, taxes) and political situation is somewhat stable or at least +/- predictable. There are some postponed projects, and new interest from low expense seeking investors. So again it comes down to sensible policy actions, based less on wishful thinking and more on clear plans for realistic best-worst scenarios.
So overall, it could be worse given the hard data and news. Hope on fast adjustment and soon stabilization seems to play a role . But if the many concerns regarding economy, policy and political stability in LV do not retreat until it’s necessary for many investors to raise prod. capacity, the worst (i.e. large declines in investment in services, little or no new investment in manufacturing) is to come.
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