Is there life after the… crisis?

Is there life after the… crisis?

 

Some time before the Eastern European (EE) states were on the rise. Lithuania, I am originally from, was called “the Baltic tiger” due to a big growth of GDP (from 2003 it started growing from 9.7%, in 2007 reached as high as 11.1%).

However, did these results show real economy growth, or were simply boosting because of money being pumped to the EE countries by the banks, investment funds likewise?

 

Consumer debt level here before the downturn was not high (household debt starting from 15-20% GDP), and credit institutions constantly set Western states as an example (where household debt was –e.g. in the US- more than 100% GDP, as well as more than 100% of another important indicator - debt as percent of disposable income, and most people actually lived in credit). Still, many of EE people, especially those who actually lived in the Soviet age, did not run into that debt. They would rather save and buy a necessary thing later on. This was probably due to the mentality of the nations here, or socialist education.

 

What did it bring in?

Everything is now more or less returning to the pre-crisis state. Certainly our government would say it is their merit (Lithuanian prime minister was actually a good example, having cut his salary by 40% along with all the other state expense cut). This certainly affected the consumption, but has created a certain image of government “sharing” the negative aspects of the crisis, at least from an outsider/foreign expert’s side of view.

 

The WorldBank’s Doing Business 2010 report shows that Estonia and Lithuania are still more comfortable for businesses that, say, such countries as Austria, the Netherlands and France.

The Department of Statistics of Lithuania has just (28 July 2010) announced that the Lithuanian GDP has eventually started to grow again, after showing a negative growth for 1,5 years.

Recent (results announced 23 July 2010) EU bank stress test by the Committee of European Banking Supervisors showed that the EE banks were able to manage the credit risks, and have passed the test (although most of the banks reviewed are not the local, but rather Western banks working in EE). See: http://www.c-ebs.org/EuWideStressTesting.aspx

The Ukrainian banks have cautiously started giving consumer loans now (it was even banned by the National Bank when the hryvnia fell down by 50%.)

 

EE countries seem to have been able to manage the challenge and actually overcome the crisis.

Now consumer habits have changed drastically. If you do not have much debt, that means you are independent to a certain extent and live according to your income. If you cannot get more credit, the quality of your life might worsen, but you will eventually get along with it. That’s what happened in the EE, and the people are looking with more optimism to the future. And, as they say, one of the main reasons for crisis was actually attitude of the general public to the economic circumstances.

 

Let’s see if we see any more “tiger” in the EE soon.

 

 

Links:

www.worldbank.org – the World Bank. Doing Business

www.stat.gov.lt/en  – Lithuanian Department of Statistics.

http://www.c-ebs.org/EuWideStressTesting.aspx

www.federalreserve.gov

 

 

30 July 2010

Andrejus Moksinas is an international credit & collections expert, also an expert at Lithuanian business risk portal (BizRisk.lt)

You need to be a member of Global Risk Community to add comments!

Join Global Risk Community

Votes: 0
Email me when people reply –

[Free COVID-19 Framework] What's the path to recovery look like?

We created a free presentation (attached), which discusses both global and organizational impacts of the COVID-19 pandemic, along with critical actions organizations should take immediately. This presentation introduces a framework that helps regions and organizations navigate a path to recovery via 9 potential scenarios. These scenarios capture outcomes related to GDP impact, public health response, and economic policies. The presentation also breaks down 6 immediate and critical actions…

Read more…
4 Replies · Reply by Steve Diaz Jul 8, 2023
Views: 204

If risk management is about decision making, are current risk management solutions irrelevant?

Now that the updated COSO and ISO risk management standards emphasize a connection to enterprise objectives and decision making, does this mean ERM and GRC solutions focused on risk registers and regulatory compliance are missing the true value of risk management?Will current risk management solutions evolve to integrate more decision support functionality or will standalone prescriptive analytics and other technology solutions take a more prominent role in enabling risk-informed…

Read more…
3 Replies
Views: 129

A question related to classification of instruments between trading and banking book.

We have an interesting question from one of our members.       "We usually perform OTC FX transactions with clients backed-to-back on the market (with Banks). Now we are going to perform a FX swap (i.e. Spot + forward) JPY/EUR for the Bank account for 1 week at the longest. The purpose is to get EUR place @ CB for LCR compliance purpose (no trading purposes). Bank's Management think that this should be considered as a trading position and therefore be classified within the Bank's trading book.…

Read more…
5 Replies · Reply by Prisha Singh Dec 26, 2023
Views: 308

Plunging oil prices: curse or blessing in disguise?

The recent sudden crash of oil prices has had a major impact on the world economy, leading to many troubled faces in the international arena. The Russians fear the effects of yet another powerful hit on their economy, Venezuela seems to be considering default and the Americans are weary of the consequences for its young and emerging shale oil industry. And then you have the Middle East, where the smallest match is enough to ignite the largest fire. But are these worries really justified or…

Read more…
1 Reply
Views: 90

Introducing the Global Risk Series - Book 1 Risk Management How Tos

Dear GlobalRisk Community member, Our community’s mission is to foster business, networking and educational explorations among members. Learn from some of the top experts in the industry as they clearly explain how to approach the most important Risk management concepts. Check out their expert tips and use the link at the end of each article to navigate back to the website to leave your comment or ask a question.   Some of the topics include: How do you Explain Risk Appetite?  How to Prepare a…

Read more…
16 Replies · Reply by GlobalRiskCommunity Mar 21
Views: 888

    About Us

    The GlobalRisk Community is a thriving community of risk managers and associated service providers. Our purpose is to foster business, networking and educational explorations among members. Our goal is to be the worlds premier Risk forum and contribute to better understanding of the complex world of risk.

    Business Partners

    For companies wanting to create a greater visibility for their products and services among their prospects in the Risk market: Send your business partnership request by filling in the form here!

lead