Expected length of the economic effects of the geopolitical crisis in Latvia
2015
Ancans, S., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics and Social Development
A geopolitical crisis emerged in Europe in 2014, which began with political tensions between Russia and Ukraine; later Western economic sanctions and Russia’s countersanctions were introduced, which affected many countries, including Latvia, thus, endangering economic growth at least in the East European region. In 2014 in Latvia, the counter-sanctions affected most the following industries: dairy farming, the fruit and vegetable industry and the international road transport industry; later, the fish processing industry and other industries were also affected after the Russian rouble exchange rate fell and an economic crisis emerged in Russia. It is important to enterprises of the affected industries, banks and government institutions to predict the length of this crisis in order to design appropriate action strategies. The research aim is to forecast the length of the effects of the geopolitical crisis in Latvia. The present research is based on analyses of Russia’s balance of payments, other indicators and the effects of the Western sanctions against Russia as well as on an assumption that after a certain period, Russia’s economy faces serious problems, which may lead to political and economic situation change in Russia and, consequently, to the end of this crisis. Since Russia is quite dependent on Western financial capital and technologies, it cannot have tensions with the West for a long time. By using its foreign reserve assets, Russia can maintain its external and internal macroeconomic equilibrium and the pre-crisis level of wellbeing no longer than one full year, i.e. until 2016.
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