Notwithstanding weak external demand, Latvian goods exports continue to rise

In September 2013, the external trade turnover of Latvian goods grew by 6.4% month-on-month. Notwithstanding a continuing weak external demand and complicated external conditions, our entrepreneurs have ensured export growth. For a second consecutive month, Latvian goods exports have posted growth (9.8% month-on-month), whereas goods imports grew 3.7% month-on-month.  

Albeit in September the value of goods exports dropped year-on-year (-2.3%), it is being importantly impacted by falling activity in some groups of goods. Despite a very high export growth of cereals in September (7.2 times month-on-month), vegetable product's group has maintained the greatest negative impact (year-on-year drop of 51.9%) on the overall annual drop in goods exports. That was determined by last year's record high harvest. The exports of iron and steel have dropped by 23.5% year-on-year, which is a result of the halted production of AS "Liepājas metalurgs". The annual growth of goods exports was negatively impacted also by a drop in the exports of land transport vehicles (-28.0%). Positive annual growth was retained in the exports of two largest branches of the Latvian economy: wood and its products (+25.7%) and foodstuffs exports (+10.5%).

In September goods imports grew both month-on-month (3.7%) and year-on-year (0.8%). Of the large goods groups, growth was fastest in the imports of foodstuffs (+12.1%) and wood (+26.6%).

Confidence indicators are continuing to improve in Western Europe. The Economic Sentiment Indicator (ESI) has been improving for a sixth consecutive month (albeit in October not as fast as before). In most of our main trading partners, ESI has grown (the two exceptions were Lithuania and the United Kingdom where this indicator dropped). The fact that consumer confidence is improving in Europe allows to hope for an increased demand for goods produced in Latvia. Moreover, the data published by the European Commission indicate that in October the evaluation of export orders improved and so do prospects for future production.

The latest economic forecasts of the European Commission for the coming year point to improving growth rates in all of Latvia's main trading partners compared to this year. In many of them, this improvement could take place parallel to the recovery of private demand that will also promote of their imports. That gives rise to a hope that the demand for Latvian made goods could improve. Thus it can be expected that export growth next year could be promoted by increased external demand to be followed by accelerating investment activity aimed at increased export capacity.