Analytics, Direct Speech, Export, Latvia

In 2016, the value of goods exports remained almost unchanged year-on-year – there was a mere 0.3% drop, whereas the import value of goods has decreased by 1.7% year-on-year. Overall, evaluating the goods external trade activity in 2016, it could be compared to crawling, which is hardly cause for rejoicing, but, given the existing circumstances, is to be commended.

On the one hand, numbers do not deserve particular praise, for the nominal exports of have dropped, yet it mostly has happened under the impact of the drop in global prices and shrinking re-exports, which account for a relatively large percentage in the structure of Latvian goods exports.

In 2016, the amount of goods export, or the real export of goods, even posted a small rise, which is to be commended, given the weak external demand and the increasing competition in the external markets. Evaluating the results of 2016, representatives of several branches (food, wood, pharmaceuticals, construction materials etc.) have admitted to have been able to improve their positions in the existing export markets and acquire new markets for their products. This is borne out by the increase in Latvian market shares in world's imports.

In 2016, the increase in agricultural and food products, chemicals, wood products, construction materials, transport vehicles and furniture made a positive contribution to goods exports. A negative impact was from goods groups with the greatest percentage of re-export – the drop in the exports of mineral products, mechanisms and electrical equipment, base metal products and textiles.

By country – the greatest positive contribution in 2016 was made by the increased exports to Germany, Sweden, Denmark, the United Kingdom, Estonia, the Netherlands, Uzbekistan, Ukraine, Finland etc.  

Goods imports continued to stagnate in 2016 for a fourth consecutive year. Even though the weaker increase in goods imports continued to improve the balance of goods external trade, the drop in imports is related to the slow growth in exports, weak investment activity and the dropping oil prices.

2017 forecasts for world economic growth are positive, albeit moderate.  Developments in the external environment are still very difficult to predict both in the context of geopolitical events and with reference to the change in U.S. policies and the expected election in several countries of the European Union (EU). In 2017, the Latvian economic growth predictions are mostly based on hopes for a resumption of EU financing inflows and for a more favourable development of external demand, which could renew investment activity and speed up economic growth.

At the end of 2016 and in January 2017, an increase in the economic sentiment index (ESI) in the EU countries was observed. Flash estimates also suggest that GDP growth in Latvia's external trade partners could be slightly faster than projected before. That raises the hope for an increase in external demand.

The negative impact of Russian sanctions and drop in Russian demand on Latvian export has decreased, but it is yet to be fully compensated by new markets. Even though,  as a result of the Brexit vote, in the second half of 2016 no drop in demand from the United Kingdom was observed, the future is still unclear after the country exits from the EU.

Latvian entrepreneurs, including exporters have often managed to assert their flexibility in overcoming different problems and demonstrate their ability to adjust to changes in demand. However, in order to increase productivity, competitiveness and Latvian export potential, a stable tax system, productive investment, real and active state support in alleviating the bureaucratic burden and promoting cooperation with the currently most important trade partners and Scandinavia as well as the markets yet to be fully conquered, for instance, Belarus, Central Asia (Uzbekistan, Kazakhstan and others) and other Asian countries (China, Japan, South Korea), the Black Sea region, the countries of Middle East (Iran) and India, where not all opportunities on offer have been used.

Even under the conditions of keen competition and weak demand, a purposeful restructuring of activity, diversification of goods and the market, can bring positive results in the activity and export of businesses.

There is the saying that it is more difficult to catch someone who is moving than someone who is standing still. Therefore, exports of goods should continue to "crawl along" purposefully, to gradually stand up and walk!