Latvia will start using EURO currency starting from January 1st of 2014. That will be second Baltic country to join EURO zone. EURO is used already in 17 different countries. The total number of inhabitants where EURO is used is over 330 million people. The EURO is second most important currency in the world after US dollar and form’s 28.3% of the IMF international currency reserves.
Latvia will benefits from joining the currency zone. Taking account that Latvia is European Union member and has tight trade relations with other EU countries. The importers and exporters gain a lot from the cost cuts of currency trading reduce the risks, which simplifies the transactions between member countries. The EURO will also reduce the loan payment costs for the companies that have taken loan in EURO.
Companies will also have better access to different security instruments which are noted in EURO currency. The cost of insurance is less in EURO than in other not so liquid currency.
Strong currency will reduce the risks involved with floating exchange ratio. EURO currency will provide a better stability and will improve the predictability of the Latvian economy. Stable currency will attract investors who would not have taken the risks of devaluation of Latvian Lat.
The joining of EURO zone will increase the ratings of Latvian biggest banks. After the final decision of Latvia joining the EURO zone Standard & Poor’s increased the Latvian national rating to BBB+. High credit rating will reduce foreign loan costs. That is also a good indicator to investors that Latvian economy is doing well and increases the Latvian prestige.
EURO currency will give Latvian customers a better ground for comparing products and service prices in other EURO countries. Latvian president Andris Bērziņš also noted in his speech that EURO will also reduce the cost of servicing national debt. The cost cuts will enable to increase the tax free minim wage limit.
The Latvian real estate market is also waiting for the EURO. The ELR Agentis analysts predicts that in short them ERUO will decrease the real estate prices. In the long perspective the EURO will affect the market in positive way reducing local currency risk and cost cuts of loan servicing.
Jurmala real estate prices will probably stay in the same range or increase a little. The stability in Jurmala real estate prices will be mostly affected by the immigration laws change in 2014 with reducing the living permit number to 700, in 2015 525 permits and in 2016 only 350 permits annually. This might also affect the purchase diction speed for Russian rich and famous who find the Jurmala one of the most liked investment and leisure destinations in Baltics.