OREANDA-NEWS. December 13, 2010. The Baltic States still continue to manage the consequences of economic downturn, where the biggest successor has been Estonia, as in Estonia is expected the fastest growth of the gross domestic product in 2011. Rather considerable success has scored Latvia due to some major, though still unfinished structural reforms. According to forecasts the growth of economics over the next year will be slower in Lithuania due to procrastinated reforms and insufficient investments in production equipment, reported the press-centre of DnB NORD Banka.   

The price for success will imply progressively growing inflation. In 2010 deflation in all three Baltic States was discontinued by global raise in raw material prices, whereas moderate ascent in prices will be maintained due to pressure exerted to advocate the raise in wages despite the still remarkable level of unemployment, as drastic changes in the proportions of various industries have caused an eminent structural unemployment problem. Even though the share of the basic industry in Latvia is low enough, its fast recovery in 2010 has managed to produce the news on shortage of qualified workforce. According to expectations, the proportion of work-seekers over the year to come might descend and reach 13 per cent in 2012.

In terms of workforce costs all three Baltic States over the year have reinforced their competitiveness among the new EU member countries; in 2011 is expected slight increase in the average monthly wages, and the trend should persist in a year as well. However, growth in productivity of labor over the period might exceed that of the wages.

Growth in Latvian economy may be facilitated also by the low starting point at the beginning of the year, as the drop of GDP in Latvia was more profound than in other Baltic States. Due to the unfavorable base effect Latvian GDP in 2010 might appear even lower, whereas in 2011 an ascent is expected in all three Baltic States: in Estonia at the level of 5%, in Lithuania at 2%. Latvian GDP should be in between these figures and maintain an ascending trend. Rise in prices in 2011 according to forecasts should be within 1.5 per cent in case of constant tax rates, in one year approaching the mark of 3 per cent. 

After the heavy fall in 2009 the current year's Latvian export results are impressive and in 2011 the progress should continue. Yet according to expectations further annual changes will be less drastic and rise in prices will also preclude such a sharp growth of the yields from export. Anyway, the ramifications of the base effects to the total annual results should be positive, bringing the total growth in exports over 2011 close to 10 per cent again. One should note that maintenance of similar speed in the future will require considerable investments.  
 
Trends in the other Baltic States and Poland
Owing to continuous economic policies as well as ability to swiftly achieve political agreements Estonia has managed to avoid any budget problems. Budget consolidation is completed, and further downsizing of direct taxes is not excluded in the future. Estonia is attracting considerable flows of direct foreign investments, and the mood within the public sector is also improving. The only obstacle to the economic growth is persistently high level of debt within the private sector.  
Recovery of Lithuanian economy in 2011 to considerable extent depends on exports, as domestic market is still weak. Unfortunately, low investment ratios, feeble competitiveness and long-lasting inefficient reformation of the public sector and unsuccessful business climate improvement process undermine the hopes to rapid increase in exports. Future outlooks are marred by political disagreements and high level of emigration, which is reducing the scope of qualified workforce.

In turn, sensible domestic and foreign policies adopted by Poland have ensured new export opportunities and increased attraction of Poland in the eyes of investors. Positive future expectations within the private sector and relatively low debt both have paved the road to stronger domestic consumption. Poland is very likely candidate to one of the highest growth ratios within the EU both in 2010 and 2011. 
 
Global trends
Internationally, trade volumes in 2010 resumed faster than expected, due to consumption recovery, intense resumption of reserves, as well as various financial incentives.

For instance, development of Russian economy is steered by favorable trends in raw material prices, whereas German exports are materially promoted by high demand in swiftly developing Asian countries. At the same time the government of China has considerably slowed down the state economy in order to prevent overheating. The consumption by Chinese households is dropping; the consumption level is lower as compared to G7 or other Asian countries, yet the threat of "new bubbles" still persists.   

There is little doubt that major risks to the global economy pose the debt crisis of financially weakest countries within the Euro zone. Anyway, we are positively convinced that both the EU authorities and the governments of the leading countries are aware of the dangers and will act to preclude material impact on the actual economy.