The growth that we had a couple of years ago won’t return so soon, but the situation might start to stabilise and gradually improve in autumn next year, AS "ELKO Grupa" president Egons Mednis told LETA in his interview.

 

Mednis admitted that the question of when the lowest point will be reached and purchasing capacity might improve is very difficult and mostly depends on the global economic situation.

 

„We have known forecasts which we put forward as goals. However, we are currently studying the ongoing situation attentively, making projections across quarters. Just last year I personally had great optimism, thinking that the state of crisis would stabilise within half a year. Looking at how deep it is now, I really wouldn’t want to forecast significant improvement earlier than the middle of next year, second half of the next year,” Mednis said.

 

He added that there are signs showing that the situation has become somewhat calmer; still, considering the depth of the problems in the banking sector, on the export market and the current employment figures – even if the situation on the global markets stabilises by the end of summer, we will only feel it after half a year.

 

„If the market has shrunk so drastically, it leaves an impression on the outlay structure. Even at the end of last year and early this year, our stance was to wait. No radical steps were made, since a certain amount of hope existed for these issues to be temporary. By the middle of the first quarter, it was clear that the situation was not improving but getting more serious,” „ELKO Grupa” president admitted.

 

Seeing the change on the market, the company took optimisation and labour efficiency improvement measures. According to his words, the reduction concerned both the salary structure, reducing wages by 15%, and the staff, which was cut by around 10%.

 

„I must admit that over the course of the last five years, during the period of strong growth, all activity was largely aimed at gaining market share and increasing turnover, which was logical and understandable. But this breather may be used to arrange internal processes and improving labour efficiency,” Mednis stressed.

 

„It is hard to say how much the IT market turnover may fall this year. The drop might be larger in some segments, especially on the end user market. This is connected to the purchasing power of inhabitants as well as unemployment, available funding and a more conservative attitude towards expenditure. In some segments related to business and efficiency of labour, I believe, investment will go on. I must admit that the overall IT market might shrink 45-50% this year,” Mednis projected.

 

He also said that the influence of the economic crisis is different in every region, although it has affected absolutely everyone.

 

„If we look back at Latvia, the market started to slow down as early as spring, early summer last year. At first, this could have been explained by seasonal fluctuations, as the market traditionally cools down, becoming more active as the autumn season approaches, reaching a high around the New Year,” Mednis said.

 

„In other regions – Russia, for instance ­– there were no signs of the market slowing down until August. The first signs really came after the Georgian conflict. In September, the attitude was that this was a brief slump and everything would stabilise right away. Unfortunately, this was the very beginning of the crisis,” Mednis admitted.

 

There are many explanations – the state of the global economy, the drop on the financial investment market, the Georgian conflict. Investors walked away, funding and consumer credit became less available. Raw material prices fell sharply, followed by the devaluation of local currencies. Together, these factors led to very severe consequences in a relatively brief period of time, Mednis added.