Analytics, Banks, Direct Speech, Foreign trade , Latvia

International Internet Magazine. Baltic States news & analytics Tuesday, 26.09.2017, 06:39

Month-on-month drop in Latvian foreign trade is likely short-lived

Daina Pelēce economist, Latvijas Banka, 27.06.2017.Print version
The month-on-month drop in export and import observed in April, in all likelihood, will be short-lived and is not an indication of serious problems and changes in the growth trend in foreign trade.

Any worries should be assuaged by the rise in production output of manufacturing enterprises for several consecutive months, the improvement in business confidence and positive signals in the external environment and the more encouraging projections by international institutions regarding global growth.

According to the data of the Central Statistical Bureau (CSB), the export and import values contracted by 10.5% and 14.1% month-on-month, respectively. Despite the month-on-month decline, goods export and import values retained positive year-on-year growth:  1.0% and 0.2%, respectively.

Year-on-year, the main groups of goods supporting export retained growth in the positive range. Wood products were an exception. To be sure, wood export data were previously fluctuating. In four months overall, these fluctuations have levelled out, resulting in positive annual growth. Industry representatives deny the existence of any fundamental change in the branch and demand by the main trading partners (Sweden, UK) also lets us hope that wood exports will retain positive growth.


In the first four months of this year (compared to the relevant period last year) goods exports increased by 7.8%. Almost all groups of goods continued to make a positive contribution. The greatest positive contributors were the increases in the exports of food products, chemicals, base metals, wood and animal derived products.


Both external processes and own achievements allowed exporters to increase their turnover. The income from goods exports has risen owing to exporters' competitiveness, expansion of the range of export production and development of new products (primarily in the food industry), as well as the attraction of new clients in the external markets. The growth in the economies and demand of Latvia's trading partners is among the beneficial external factors, which also opens up good new opportunities for Latvian exporters.


In some sectors (food, construction materials and others), positive developments regarding investments are currently taking place and enterprises are increasingly turning to the kind of investments that would expand their production capacity. A more robust growth in the euro area and Russia, European Union (EU) funds and the tax reform announced by the Latvian government have fostered improvement in Latvian entrepreneurs' confidence (European Commission's ESI, Citadele Index), which has reached the highest level in the post-crisis period.


In its latest economic outlook published on 7 June, the Organisation for Economic Cooperation and Development (OECD) indicates that "stronger growth in the euro area and Russia will support exports, which, along with the disbursement of EU funds, will boost investment".


Although external conditions are currently favourable to exporters, global uncertainty and negative risks have not completely disappeared. Developments in the global arena can still be impacted by the rather unpredictable political actions of the US president as well as the impending Brexit whose impact we will be able to assess only after the associated actual processes are underway; oil price trends can also change developments in the global raw material price markets.


This year's domestic topical issues will be uptake of EU fund projects and the tax reform. These instruments will have a chance to favourably affect the entire economy only if they are introduced smoothly and used wisely.






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