OREANDA-NEWS. April 23, 2008. The expectations of Latvian entrepreneurs, assessing Latvia's economic situation since 2004, have experienced a dramatic fall and for the first time have shown pessimistic results, according to the results of the regular business activity research among Latvian entrepreneurs, Parex index, carried out by Parex banka in collaboration with social research company SKDS, reported the press-centre of Parex banka.

In the last quarter entrepreneurs have shown the sharpest decrease in outlook since inception of Parex Index (-4,47), and from cautious optimism has slid down below the neutral mark of 50 points to 47,47.

The research has shown that entrepreneurs have been expecting worsening of the economic situation in the country since the first quarter of 2007, when the index went through the second sharpest fall ever (-3,32 points). Since the beginning of 2007, entrepreneurs' expectations had been constantly going down for five quarters in a row. In the current period it has dropped by 13,42 points.

Still, entrepreneurs' future vision is cautiously positive, which proves a slight but stable optimism still exists. The future index (forecast for next six months) has always been more optimistic than the present index, however we must take into account that even this ratio has been sliding down over past quarters, reaching the lowest figure ever since 2004 – 51,17 points in Q1 2008.

Parex index shows, that the assessment of the economic situation in the last quarter has diminished in all 26 entrepreneurs' groups analysed within the research. Inter alia, the most significant decrease in the last quarter was demonstrated among large enterprises (with over 250 employees), where the index went down by 8,29 points, whereas companies with large turnovers (LVL 1 000 001 and more) have shown a fall in the index by 6,23 points. This shows that the slowdown in economic growth and high inflation has largely affected large companies in the last quarter.

The most significant fall in the index was observable among enterprises with shared domestic and foreign capital (-7,73 points) and production enterprises (-5,81 points). While, the assessment of overall indices stood at the lowest point among rural entrepreneurs (44,97 points) and construction sector companies (44,99). Positive assessment was observable only among enterprises with foreign capital (50,63 points), though this result stands at the lowest point since 2004.

All sub-indices have experienced a certain slowdown , including the assessment of overall economic development, economic activity of the sector, competition in the sector, turn-over of the company, profitability, financial stability, number of employees and investment inflow. Moreover, the values of all sub-indices stood at the lowest point since the inception of Parex Index.

Over the last quarter the sub-index for overall economic assessment has experienced the steepest fall of 9,83 points, continuing the negative trend and reaching the level of 35,41 points. The value of this sub-index has been decreasing since end of 2006 and has the lowest value among all sub-indices.

In the last quarter the only sub-index having a positive outlook was assessment of competition in the field (53,38 points), forecasting increasing competition between enterprises.

About Parex index
The first business activity index in Latvia - Parex Index – was established at the beginning of 2004 by Parex banka in cooperation with SKDS, the leading centre of market and public opinion research. The main purpose of the research is to establish a single index, which describes Latvian entrepreneurs subjective appraisal of the economic situation of the State. The index is calculated based on the poll and the analysis of the opinions of 750 Latvian businesses of different size and from different industries.

The index reflects the opinion and the forecasts of the business community on the level of economic activity of the country and in their particular industry, as well as an evaluation of different indicators of company operations, such as profitability, turnover, financial position, number of staff, and investment level. If the index value exceeds 50 points, this is an indicator of certain level of optimism regarding the issue; in turn, the value below 50 points depicts pessimism.