Banks, Financial Services, Foreign trade , Latvia

The deficit of foreign trade in goods and services has remained broadly unchanged since December, and the negative balance of the current account is primarily due to the profits earned and repatriated by foreign investors as well as to the weaker inflows of current transfers resulting from temporary restrictions imposed on payments from various EU funds, points out Brauksa.

As the value of both imports and exports of goods recorded similar month-on-month decreases in January, the deficit of foreign trade in goods remained nearly unchanged at LVL 131 million. Similar to January dynamics of other years, services exports recorded seasonal contractions (primarily due to the downturn in export of transportation, travel and other business services), but due to similar trends observed also for services imports, their trade surplus dropped only slightly to LVL 74.6 million, writes LETA.

In January, separate payments from EU funds were temporarily suspended, which was reflected in the decreasing inflows into Latvia's current transfers and capital accounts (in January, the deficit in the capital account of Latvia's balance of payments was LVL 0.8 million).

Foreign investors' trust remained unfaltering and was a positive feature during this period. Direct foreign investments in Latvia increased LVL 57.6 million and were the main reason for LVL 16.7 million surplus in the financial account. The outflows of funding, on the other hand, were on account of falling interbank long-term borrowing and growing short-term investment.

At the beginning of the current year, the downgrading of credit ratings of several EU countries continued, which may suggest a further weakening of foreign demand and hence also limit Latvia's export growth. Nevertheless, there is a potential for development, as indicated by increasing direct foreign investments in Latvia, including those in production.

As reported, in 2011, the current account deficit of the balance of payments was LVL 170.9 million or 1.2% of the forecast gross domestic product.