OREANDA-NEWS. January 20, 2010. Results of the Q4 2009 business activity research Parex Index show that compared to Q3, the mood of businesspeople has not changed much, and there has not been any rapid reduction in the index. This suggests that the economic situation in Latvia is becoming more stable, reported the press-centre of Parex Banka.

The study, which was conducted in December in collaboration with the SKDS public opinion research centre, reveals the views of Latvian entrepreneurs about the economic situation in the country. In comparison to November 2009, the index declined by just 0.14 points. As reported earlier, Q3 2009 was the first time since late 2006 that the index increased, which means that in the 3rd and 4th quarter of 2009, entrepreneurs were not as pessimistic as they were in Q2 of the same year.

SKDS director Arnis Kaktins: “Analysing changes in Parex Index, we have to remember that it is a pre-emptive indicator in respect to a series of Latvian macroeconomic parameters. The index shows the prevailing mood of businesspeople when taking important decisions related to their operations – invest or not invest in their companies, hire or sack employees, expand or narrow operations, etc. The consequences of the decisions taken today will be reflected in macroeconomic indicators only later, and in many cases these will just be the consequences of decisions taken by businesspeople in the past. In this sense, the stabilisation of Parex Index is very good news, indeed, meaning that the economic situation in the country is also stabilising. Thus, we do not expect the macroeconomic indicators to deteriorate very rapidly over the next few months.”

During the fourth quarter of 2009, the future forecast index dropped slightly (by 0.29 points), while the present index did not change.

Trends in the sub-indexes of Parex Index show that since the middle of last year, entrepreneurs have been increasingly positive about the overall economic activities in Latvia. Since Q3 2009, they have also been more positive about economic activities in their specific sector. The sub-indexes apply to turnover, profitability, financial status, employee numbers and investments in each company, and these have experienced marginal changes during the last quarter of 2009.

A rapid increase in optimism during Q4 2009 was seen in the building industry (up by five points) – the sector in which the greatest pessimism had existed ever since mid-2008. Currently, the most pessimistic mood is prevailing in the retail industry, while manufacturing companies are the most optimistic.

Business optimism during the last quarter of 2009 increased in the Riga metropolitan area (up by 4.47 points). It dropped by 4.21 points in Latgale and remained unchanged from the 3rd quarter in other regions of Latvia.

Enterprises with relatively large turnovers and employee numbers, as well as businesspeople whose companies are entirely owned by foreign capital have been comparatively more optimistic in 2009.

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 describing 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.