A small deficit in the current account in June

In June  2012, the current account deficit was at 49.6 mil. lats as a result of a small increase in the negative balance of goods external trade and dividends paid to foreign investors.

In June, the goods external trade deficit grew to 150.9 mil. lats, for in this month the value of imports remained almost unchanged, but the goods exports dropped somewhat. The annual growth rate of external trade, however, remains positive.

The value of services granted to foreigners grew substantially in June and the positive balance in this account amounted to 109.1 mil. lats. The increase in services exports was observed in all forms of transport (particularly in freight services by road transport) and there was a seasonal increase in the value of trip services.

The positive balance of current transfers account in June dropped to 27.0 mil. lats, for the payments from the European Social Fund had yet to flow in. 57.8 mil. lats in all was received from EU funds in June, which was reflected in the positive balance increase in the capital account to 56.1 mil. lats.

In the financial account in June there was a small positive balance (3.4 milj. latu). 52.5 mil. lats (a greater amount than the previous monthly average this year) in foreign direct investment flowed into Latvia this month. That points to the fact that Latvia, retaining stable growth continues to offer attractive investment opportunities to foreign investors.

A positive development has been Russia's confirmation of it joining the WTO. Even now Russia is Latvia's third most important export partner (after Lithuania and Estonia), but the reduction of customs tariffs and other trade limitations will promote a further development of economic ties. An increase in exports is also promoted by the attraction of foreign investment in various branches, including those related to production, yet it must be kept in mind that external demand is still limited. Evaluating the possible development of the situation, the Latvian current account balance will likely continue to retain a small deficit. 

Latvia's Balance of Payments

APA: Opmane, I. (2024, 23. may.). A small deficit in the current account in June. Taken from https://www.macroeconomics.lv/node/2199
MLA: Opmane, Ieva. "A small deficit in the current account in June" www.macroeconomics.lv. Tīmeklis. 23.05.2024. <https://www.macroeconomics.lv/node/2199>.

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