Despite external risks, goods exports in 2015 maintained a small increase
According to the data of the Central Statistical Bureau (CSB), in December 2015, Latvian foreign trade value dropped by 10.3% month-on-month, with export and import diminishing by 12.6% and 8.3% respectively.
Overall, the Latvian goods external trade turnover in 2015 remained close to the level of the previous year, dropping only 0.2%. In spite of the reduced Russian demand and a drop in the exchange rate of the rouble as well as the sluggish and spotty growth in the euro area countries, the exports of Latvian goods last year managed to post the small rise of 1.2%.
The greatest positive contribution to the year-on-year growth in goods export was made by electrical devices and mechanisms, cereals, optical and medical appliances and measuring devices, wood, paper goods, pharmaceuticals and base metals. A negative effect on total goods exports was made by the drop in the exports of mineral products and foodstuffs, including a substantial drop in the export of alcoholic beverages to Russia and a drop in the export of dairy products resulting from the Russian embargo as well as the lifting on milk quotas and the low prices of milk in the European Union (EU).
Even though new export markets are being very vigorously sought for dairy products, the relatively small Latvian production and export amounts do not allow the exporters to compete for better prices and conditions in the external markets. Therfore, conquering new markets does not take place so quickly and successfully as to ensure market stability and compensate for the drop in the Russian demand. At the same time, the milk processing enterprises are actively trying to raise exports in the existing markets, for instance, in Lithuania and Estonia, which are still the main destinations for dairy product exports, as well as Belarus, Kazakhstan, Morocco, the Netherlands, Poland, Sweden, Finland and other countries.
By country, the greatest positive contribution in 2015 was the rise in exports to Algeria (mostly cereals), Saudi Arabia (cereals and wood products), Lithuania (various foodstuffs, oil processing products, medical supplies, paper products, mechanisms, electrical devices, transport vehicles, toys and sports equipment), the Netherlands (cereals, wood and its products, furniture, electrical equipment, transport vehicles, foodstuffs, incl., meat un dairy products, medical supplies), the United Arab Emirates (data transmission electrical equipment, semiconductor devices, data storage equipment, wood products), France (electrical devices, cereals, seeds, fish), the United Kingdom (wood products, glass products un oil processing products), Denmark (meats un fish products, cereals, wood products, furniture, soap, fur products, mechanisms un electrical devices, base metal products, knitted and crocheted wearing apparel, fishing vessels), the USA (mechanisms un electrical devices, wood products, optical cables and other optical elements, medical equipment, breathing apparata, cereals, milk processing products), Turkey (wood products, mechanisms un electrical devices, gold and jewellery, live cattle), the Czech Republic(mechanisms un electrical devices, seeds, medical supplies, cosmetics oil processing products, base metals, various foodstuffs, meats un fish products, sports equipment).
In 2015, goods exports to Russia dropped by 24.4% (or 267.6 mil. euro) year-on-year. The greatest drop was in alcoholic beverages, dairy, meat and fish products as well as wood products, whereas the exports of mechanisms and various optical and medical equipment and measuring devices were up
According to the operational data of the World Trade Organization, an increase of Latvian goods export market shares was observed in global imports in 2015 after two years of stagnation. This indicates that the exporters have worked vigorously toward acquiring new markets.
Goods imports continued to stagnate for a third consecutive year and in 2015, it practically remained at the level of 2014, with a small drop of 1.3%. Even though a weaker growth in goods imports continued to improve the goods external trade balance, the drop in imports is related to the slow growth in exports, weak investment activity and a decrease in oil prices.
At the beginning of this year, the view of entrepreneurs regarding the possibilities of future production exports is slightly more optimistic than up to now. This is corroborated by the confidence indicators published by the European Commission. In January, the evaluation of the amount of export orders improved and so did the indicators of the amount of export orders. The view of producers regarding their competitiveness both domestically and outside the EU has become more optimistic while the evaluation of competitiveness within the EU continued to deteriorate.
As for the Latvian external trade prospects for 2016, there are still many risks for export growth: the geopolitical situation, the uneven development of the global economy, the weak external demand as well as the sluggish implementation of enterprise investment projects. A further goods export growth will depend on the ability of Latvian entrepreneurs to find new markets and augment their competitiveness, by investing to increase the productivity of their enterprises, new technologies and produce innovative goods.