Contribution of seasonal factors and export markets to a decline in foreign trade in January
In January 2012, the value of Latvia's foreign trade turnover shrank month-on-month on account of seasonal factors and a slower economic growth in the major trade partners. The value of commodity exports contracted by 6.4% over the month, with the annual increase remaining positive (12.5%), and the value of commodity imports decreased by 5.3%. Over the year, imports of commodities expanded by 25.7%.
The contribution of the rising oil prices in the global market (mineral products account for almost one fifth of imports) to the annual growth in the value of commodity imports notwithstanding, an increase in imports of machinery and mechanical appliances was, however, more pronounced due to the low base (the share of this group of commodities is similar to that of mineral products, while the annual growth exceeds 50%). Imports of some construction-related goods, such as stone, plaster and cement articles, and wood and articles of wood expanded rapidly and imports of smaller commodity groups also followed an upward trend, with imports of fats and oil growing by more than 138% in comparison with January 2011. Hence imports of intermediate goods related to the current activity of the construction of industrial production buildings have recorded a notable overall increase.
Annual export growth was partly attributable to more favourable weather conditions than expected in the near region regarding the construction activity in winter. Thus exports of metals and articles of base metals as well as those of stone, plaster and cement articles posted a substantial rise along with the rapid annual growth in exports of mineral products, plastics and rubber products. Exports of food and agricultural products, including those of live animals, also expanded buoyantly in comparison with January 2011. The intention of Russia to prohibit imports of live animals from the EU Member States may adversely affect exports of animals after 20 March. In 2011, exports of live pigs to Russia amounted to almost 2% of Latvia's total exports to Russia. Such a share of exports may not appear to be crucial in total exports of Latvia but it is definitely a significant market for a number of producers. The relationship of the EU and Belarus regarding the development of foreign trade of goods and services remains quite uncertain: potential imposing of sanctions on Belarus would affect both bilateral trade of a number of commodity groups (such as food, textiles and building materials) and Latvia's freight traffic and port services.
Over a month, export value has fallen on account of seasonal factors, and the situation in Latvia's main trade partner countries, so far, is better than in Europe overall. However, the deterioration of the external environment, inter alia the economic downturn in a number of Latvia's major trade partners and a decline in new orders will affect growth in Latvia's manufacturing and exports over the year. Meanwhile, a fairly low level of domestic private consumption will not result in a significant accumulation of pressures on imports.