The beginning of the year not gratifying

According to the data of the Central Statistical Bureau (CSB), in January 2016 the Latvian foreign trade turnover dropped by 14.4% month-on-month, with export and import dropping respectively by 13.0% and 15.6%. At the root of the contracted external trade activity was still the weak foreign demand. The annual growth rate in goods trade was negative:  export dropped by 10.9% and import by 12.2%.

In January of this year, the goods export posted the absolutely smallest level of export value since February 2012. In January, the greatest month-on-month drop was experienced by agriculture and food products, optical, medical and measuring devices, transport vehicles, as well as mechanisms and electrical equipment. Year-on-year, the greatest decrease in goods exports was observed for mineral products, textiles, base metal products, mechanisms and electrical equipment.  A positive year-on-year growth in January was maintained for plant-based products, chemicals, wood and its products, construction materials, plastics, paper products and optical, medical and measuring devices.

Goods imports dropped both under the impact of seasonal factors and related to the slow growth of manufacturing branches and the weaker need of manufacturing for raw materials.  

The trend of the last three months in external trade as well as uncertainty regarding the development prospects of the global economy and geopolitical situation in the East prompt caution regarding growth prospects of Latvian good exports in  2016.  Even though the January data cannot yet be considered a mirror of the future foreign trade trends, an obstacle for a positive future outlook is also the January data of manufacturing, which diminished both month-on-month and year-on-year, including a decreased output in one of the recent engines of export growth  – the manufacturing of computers and electronic and optical equipment. The business sentiment indicators are equivocal: confidence indicators published by the European Commission (EC) point to the fact that, in assessing their competitiveness position, the evaluation of the first quarter by entrepreneurs had improved in the domestic and European Union (EU) markets as well as outside the EU, but the Economic Sentiment Indicator (ESI), including that in industry, in February deteriorated not only in Latvia but throughout Europe.

The increase of Latvian goods export market shares in world's imports that resumed in the second half of last year indicates, however, that Latvian entrepreneurs are not giving into the surrounding pessimism but continue to work vigorously.

In the last two years, wood processing was one of the main driving forces in manufacturing and exports, thus justifying previous investment in this branch.   Moreover, despite the global drop in prices of many wood products, the export income in the branch has continued to grow. Last year, good results were achieved by the producers of wood pellets who, increasing the full load capacities of pellet production, achieved growth in their export amounts. The growing trend could continue also this year, owing to investments and an increase in pellet prices in the global markets. With the demand in world's markets for bio-fuel continuing to increase, further development is planned this year as well. For instance, the enterprise "Brocēni Pellets" this year will build a new factory in Brocēni with a capacity of producing about 150 000 tons of pellets per year.

The food industry enterprises are also gradually adjusting to the new market conditions. Even though in the exports of dairy and other food products Lithuania and Estonia predominate, the exports to Germany and the Netherlands are on the rise and export amounts have increased to the countries where they were not big previously. In 2015, completely new markets have appeared in food exports: China, Egypt, Turkey, Georgia, Tunisia, Serbia, Japan, the United Arab Emirates and others. The milk processing enterprise  "Latvijas Piens" this year has dispatched the first cargoes of its products to Saudi Arabia and Israel, and the enterprise is making a concerted effort to develop exports to different regions in Asia as well as to increase sales amounts in Europe and Scandinavia.

With the demand for beef increasing in the world, opportunities open up also for Latvian exporters to export both livestock and meat. Last year, the Turkish market once again became the main export destination for Latvian cattle growers and there is hope that it will remain as such in 2016 as well.

The canned fish producers continue to successfully sell their products in some Eastern markets, for instance, in Israel, Hungary and Serbia. This year as well it is expected to increase sales amounts in Western markets, both by attracting new partners and by working with the current ones. The canned fish producer "Karavela" has prepared several new products with which it expects to increase sales in the Scandinavian market and the enterprise has also detected some prospects in the US market where preliminary work has been done to begin selling its products in the US retail networks by mid-June of this year.  

The pharmaceutical enterprises also do not plan to rest on their laurels but to increase their export market share. Thus "Solepharm", which develops and creates new pharmaceutical original products has begun to export three of its original products to Albania and the registration process is currently taking place for ten products which are expected to be exported to Macedonia. The enterprise exports 70% of its production and its products are already available in eleven countries, including Finland, Poland, Ukraine, Lithuania, Estonia, Georgia, Bulgaria, Azerbaijan, Armenia, Moldova and Serbia. The Latvian company "Lotos Pharma" currently exports to seven countries and last year its sales experienced the fastest growth in Georgia and Ukraine.

Even though the foreign trade statistics are less than gratifying, these and other examples prove that even under conditions of tough competition and weak demand, a purposeful restructuring of activity, diversification of goods and markets can lead to positive results in the functioning of enterprises and in exports