Analytics, Economics, GDP, Latvia

The company’s representatives said that the Baltic states’ economic growth is currently driven primarily by domestic demand. The situation on the labor market and growing investment are favorable as well, but external factors are expected to weaken the growth rate.

Global economic trends of the past couple of years, which continued also at the beginning of this year, have also been favorable to Baltic exporters, the Coface representatives noted.

In February 2019, for instance, exports of timber and timber products grew 16.7 percent y-o-y on strong demand from the construction sector. Exports of chemicals, agricultural produce and mechanical engineering products increased as well. Latvian export products were shipped mainly to the other two Baltic states, as well as Germany, Russia and Sweden.

During the first two months of 2019, Lithuanian exports grew 8.9% against the same period a year ago. Meanwhile, Estonia’s trade portfolio with the euro area made up the smallest share (46% in February 2019) of the country’s exports. Compared to the other Baltic states, Estonian exports went mainly to Nordic countries, the Coface representatives said.

The company’s representatives indicated that this year external markets are posing greater risks to Baltic exports that the domestic situation. Export volumes to the key market – the euro area – have started to decline. Coface projects the euro area’s economic growth to slow down to 1.4%t this year from 1.9% in 2018 and 2.5% in 2017.

Coface expects Latvia’s GDP to grow 3.1% this year, while the Lithuanian and Estonian economies are expert to increase by 2.8%.