Exports down for a fourth consecutive month

According to the data of the Central Statistical Bureau (CSB), the external trade turnover of Latvian goods in April of 2016 dropped by 1.5% month-on-month and by 7.4% year-on-year. Year-on-year, the value of goods exports and imports dropped by 7.0% and 7.7% respectively, and thus, for a fourth consecutive month, the annual growth of goods exports was negative.

 In April, export of goods remained almost at the March level, posting a slight rise of 0.0.4% month-on-month. In export, foodstuffs, mineral products, plastic products, textiles, transport vehicles, mechanisms and electrical equipment were all on the rise.

In the first four months of the year, the exports and imports of goods have dropped by, respectively, 5.7% and 7.8% year-on-year. Even though the total export value of goods has decreased, a positive annual growth has remained in several groups of goods. The exports of plant-derived products, foodstuffs, chemicals, wood products, construction materials, plastic and paper products grew. The greatest negative contributor to export growth was the drop in the exports of mechanisms and electrical equipment, mineral products and textiles.

Several enterprises in the food industry still face problems. For each of the food production sub-branches they are of a specific nature: for instance, the growth of the dairy industry is impeded by the low purchase prices of milk and milk overproduction; the situation is similar in the fish producers, whereas meat producers suffer because of the African pig plague.

Despite the many problems, Latvian entrepreneurs continue to actively develop their export markets and, for three consecutive months, the exports of foodstuffs have been slowly growing. Ināra Šure, Chairperson of the Council of the Federation of Latvian Food Enterprises, predicts: "The exports of Latvian food producers could grow slightly this year, for the work of previous years will begin to yield benefits." After the embargo set by Russia on the imports of agricultural products, diversification of the export markets is particularly significant for the Latvian producers. In the last few months, for example, Latvia has agreed nine veterinary certificates to Montenegro, Australia, Iraq, Israel, Georgia, Qatar, Japan, Brazil and Moldova, and this may foster further exports of agricultural products to third countries. Work is continuing in conquering the food markets in the United States and China and opportunities are sought for export of dairy and meat products to the United Arab Emirates.

The drop in Russian demand and the decreased value of the Russian rouble have had a negative impact on the textile industry, for which Russia used to be an important market. After a substantial drop, textile exports have been stabilizing since mid-2015. In this industry, too, there are enterprises that have not given in to doom and gloom and are following new directions in their business.  For example, "Lauma Fabrics" has spotted a growth potential in the area of geotextiles, for the demand for technical textile is growing rapidly in the world. "Lauma Fabrics" has acquired 50% holding in "Tele Textiles Latvia", which produces geotextiles, and this year the enterprise is planning to produce 1.7 million square metres of geotextile fabric mostly used for the reinforcement of soil in road construction and prevention of erosion. These textile products in their entirety will be exported to Poland, Italy, the Netherlands, Scandinavia and other European countries.

Latvian external trade activity and growth of its goods exports are still to be evaluated as very fragile and unstable in a breakdown by branch. The World Bank this week reduced the forecast for world economic growth for this year, indicating that the developed countries are recovering at a much slower rate than expected and the low raw materials prices continue to have a negative impact on the economies of these countries. The low investment activity has an undoubtedly negative impact on a successful development of entrepreneurship and thus on further export growth. The greatest challenges faced by industries oriented toward export and development of greater added value are a lack of specialists and market diversification.