Macro Focus - October 2018
The temperature is slowly rising in the Baltic economies
  • The Baltic economies are operating above their potential
  • No overheating, but economic temperature is rising gradually
  • Monitoring, fiscal prudence, and productivity-boosting reforms are necessary
The Baltic economies are now fully recovered from the past recession, and the output gaps have been fully closed in all three countries. However, the economies are continuing to expand at above-potential rates. Moreover, economic confidence is close to all-time highs, unemployment is the lowest in a decade, and wages are growing at an accelerated pace. Thus, one cannot avoid asking, Are the Baltic economies on a sustainable path or could they be heading towards an overheating? To help us answer this question, we constructed an economy heat index. It shows that, although the Baltic economies are not in the overheating mode yet, the temperature is slowly rising. This is largely driven by a tight labour market, but it has not yet translated into high inflation and a buildup of imbalances elsewhere. Nevertheless, the situation requires close and continuous monitoring, and some actions may be needed. Productivity-boosting reforms and a looser immigration policy could put the economies on a more sustainable track.

 


PDF-Document Read full analysis here


For more information about this report, please contact:
Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt
Vytenis Šimkus, +370 5 258 5163, vytenis.simkus@swedbank.lt

This email is sent through the web-based distribution system of Swedbank Macro Research. As a subscriber you can change your settings regarding what publications you will receive by clicking “Change your settings”. You can also unsubscribe from this particular newsletter by clicking "Unsubscribe". Information on the Swedbank Principles of processing personal data can be found here.

 

Subscribe »
This letter is distributed by Swedbank in cooperation with Brightly. The letter is personal.
You need Adobe Acrobat Reader to show PDF documents. (download here)