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International Internet Magazine. Baltic States news & analytics Friday, 23.06.2017, 18:43

There are stumbling blocks for Latvian export, but it continues on its way

Daina Pelēce economist, Latvijas Banka, www.macroeconomics.lv, 16.12.2016.Print version
In October 2016, the foreign trade turnover increased by 4.1% month-on-month. In the course of a month, the goods export and import values have grown by respectively 1.9% and 6.1%. Year-on-year, goods exports have dropped by 3.5%, whereas imports have practically remained the same – there is a mere 0.4% increase.

In October, positive growth was posted by agricultural products (grains, milk and cream, eggs, frozen and thermally processed fruit, tea, coffee, different spices), food industry products including beverages; mineral products; plastic products; construction materials and jewellery. A month-on-month drop in October was posted by wood products, which hitherto had been a positive support for exports.


In the first ten months of this year, goods exports have dropped 1.7% year-on-year. A positive contribution was made by the rise in the export of agricultural and food products, cehmicals, wood products, construction materials, transport vehicles and furniture. A negative contributor was the drop in the exports of mineral products, mechanisms and electrical equipment, base metals and textiles.


In 2016 the growth of goods exports will be close to last year's level, furthermore, the real exports of goods have managed to post a moderate increase, which means that goods exports have been most adversely impacted by the drop in global prices.


Such a result deserves mention, since the last couple of years have been truly challenging for Latvian goods exports with all kinds of events presenting problems: the economic sanctions established by Russia, the downslide of global prices, the Western export markets (the weak growth of the euro area) and Eastern markets (the weakening of the economies of Russia and other Commonwealth of Independent States countries as well as the weakening of the Russian rouble). 


In the foreign markets demand has been weak for a long time and competition in the main markets is becoming keener. The protracted low investment level is one of the main negative factors that are impediments for the long-term growth of both goods exports and imports.


Uncertainty regarding the future and prospects for Latvian foreign trade are exacerbated by the British vote and the possible impact of Brexit on future economic cooperation with the United Kingdom; the Italian referendum and the French election as well as the election results in the United States, which suggest increasing protectionist tendencies in the world.


The Competition 'Export and Innovation Prize 2016, on the other hand, clearly indicates that Latvian entrepreneurs and exporters are not giving in to hopelessness but continue to work energetically despite the many problems.This year 117 applications from various enterprises were submitted. The list of candidates and laureates (they were announced at a solemn ceremony on 8 December 2016) is proof that entrepreneurship is alive in Latvia and the range of products and services it supplies is wide and versatile, which indicates that there are many different niches in which our producers are sufficiently competitive in the global market. There is a number of enterprises producing new, innovative things exclusively for the export market, about which we know nothing.  


Goods exports could be positively impacted by the expected uptake of European Union funds, which would lead to resumed investment activity. We also expect the economic activity of the external markets to pick up and that foreign demand will gradually rise. At the same time, there are many stumbling blocks that endanger the future prospects of exports. Among them is the still disorganized infrastructure in the regions, the lack of qualified labour force, increasing labour costs, which weaken competitiveness, and the uncertainty of entrepreneurs regarding taxes and the geopolitical situation in Europe and in the neighbouring countries.






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