Export grows; good reason for future optimism

Information about the development of foreign trade in March of 2010 indicates that the improvement in the confidence indicators of previous months has not been just optimism of the entrepreneurs regarding the expected economic recovery. The export value of goods in March improved by 13.4% over February and 19.7% over March of previous year. The increase in nominal export was in part influenced by the rise in prices of metals, wood pulp and mineral products, but exports grew substantially in other groups of goods as well: the export of food industry products grew 29.2% over one month, chemical products 27.4%, and transport vehicles 59.2%.

Along with the recovery in industrial production, where the increase in March was 12.2% over February and 11.1% over March of 2009, the need for imported raw materials has become more acute. The stabilizing of domestic demand is also expressed in growing imports, and the import value of goods in March exceeded the February level by 16.6% and the import value a year ago by 4.8%.

The dynamics of second quarter confidence indicators in industry is likewise optimistic: none of the indicators that characterize the evaluation of competitiveness is negative any longer. The evaluation of new orders for the coming months has meanwhile grown from -16 to +6 points (response balance, %), evaluation of expected exports from 1 to 10 points. The capacity load continues to grow already reaching 60%, and the entrepreneur evaluation of competitiveness position in the domestic and foreign markets is also improving. The small reduction in unemployment in April can be explained both by seasonal openings and by a stabilization of the economic situation.

A successful development of foreign markets in the coming months will be the main factor affecting the increase in Latvian business activity. A risk factor in the development of export demand is the economic hardship experienced by Greece and possibly affecting the overall development of the euro zone, yet the attempts of the Greek government to quickly react to the situation and the aid planned by the governments of other euro zone countries and international institutions are certainly commendable.