Analytics, Baltic Export, Baltic States – CIS, Financial Services, Latvia, Markets and Companies, Russia

Swedbank chief economic expert Lija Strasuna emphasized that the weakening of the Russian ruble will ''certainly'' impact all Latvian exporters who sell their products or services to Russia.

''The ruble to euro exchange rate is already 45% lower than it was a year ago. In reaction to the falling currency, the Russian Central Bank increased interest rates this week, which led to a small recovery of the ruble, which was followed by another slide. At the same time, this decision made financing in Russia more expensive, which in turn will reduce investments and slow down economic development. Meanwhile, the increasing inflation and substantially larger loan repayment rates will in turn lessen consumer spending in Russia,'' Strasuna informed.

According to her, demand in Russia for Latvian goods and services will reduce, and that the weakening of the ruble will automatically raise thew price of Latvian exports to Russia. ''This will have a larger impact on the Latvian economy than the Russian food embargo, as it affects all of Latvia's exports to Russia, not just specific products or sectors. Latvia's exports to Russia is already reducing (1.4% less in the first 10 months of the year when compared to the same period last year), and will continue to do so. We are also seeing a reduction in the number of Russian tourists visiting Latvia and also in their spending here,'' Strasuna emphasized.

SEB banka financial market services department head Andris Larins also pointed out that those entrepreneurs who export products and services to Russia will suffer the most.

He believes that the weakening of the ruble will impact Latvia's overall export, as Russia is an important trade partner. He also said that Latvia's tourism industry will also suffer. ''If Russian tourists must now spend 80 rubles for one euro, compared to 45 rubles a years ago, many Russian residents will most likely cancel their Christmas or New Years holidays to Latvia,'' he said.

Meanwhile, Strasuna emphasized that the weakening of the ruble does not mean an overall reduction of Latvia's exports. ''Total export volumes in the first ten months were 2.5% larger than the previous year. Other countries around the world and right here in Europe are witnessing economic growth, which is an excellent opportunity for our own exporters to begin exporting their products and services to new markets,'' she added.

The AFP news agency reports that the Russian ruble crashed to new record lows Tuesday, losing some 20% in value by the afternoon despite drastic overnight measures by the central bank to hike the key rate.

The ruble hit 80 to the dollar and 100 to the euro on the Moscow Exchange. Overall the Russian currency has lost nearly 60% of its value since the start of the year amid collapsing oil prices and Western sanctions over Russia's support for the separatist uprising in eastern Ukraine.