Exports of Latvian goods slightly down in August as a result of weaker demand
In August 2014, the Latvian external trade of goods turnover dropped by 5.5%. Exports went down 4.4% and imports 6.3%. The shrinking of exports was expected because of the weaker external demand. That resulted from the slow and uneven economic growth in the euro area countries as well as with a reduction in the Russian demand because of the embargo on imports of food products and the weakening rouble. Year-on-year, the value of goods exports dropped by 3.8% and that of imports by 9.3%.
In the first eight months of this year, compared to the same period last year, the exports of Latvian goods retained a 2.1% growth. The exports of wood industry, chemical industry and plastic products, construction materials, electrical and optical equipment and apparata all posted a rise.
In August, the greatest drop was experienced in the exports of transport vehicles, animal products, construction materials and wood, whereas optical equipment, plant derived products and foodstuffs posted a rise. As was expected, the drop in the exports of animal products resulted by the embargo imposed by Russia.
Even though in August the exports to Russia grew by 8.8 million euro month-on-month, in eight month it dropped by 5.1% or 35.7 million euro year-on-year. The greatest drop in the exports to Russia in the first eight months of this year was posted by transport vehicles (trailers and semi-trailers, other non-mechanically powered transport vehicles), construction materials (cement) and products of the chemical industry (medicines). In August, export to Russia grew 9.4% -primarily on account of the rise in the exports of hard liquor, wine and canned fish.
The drop in demand in several main trading partners, including Russia, Estonia, Finland and Germany, Latvian exporters are still rather successfully compensating by rises in exports and and export market shares in other European countries, e.g., the United Kingdom, Poland, Lithuania, Hungary and Sweden and by creating new products and finding other possibilities for selling them in the countries of Asia (China, Turkey, Israel, Iran, Pakistan, Uzbekistan etc.) and Americas (USA, Haiti). According to the operational information of the World Trade Organization, in the first seven months of this year, the Latvian export market shares in world imports continued to grow. That indicates that even in an unfavourable global situation, Latvian businesses still manage to flexibly react to changes in the external environment while retaining external competitiveness.
Risks are growing in the global environment that could have a negative impact on external demand. The weak economic growth in several of the euro area countries pose a threat of continuing stagnation in the euro area. The low investor activity level can be explained by the uncertainty caused by the geopolitical conflict between Russia and Ukraine as well as the slowdown in the economies both of Russia and the euro area. Caution on the part of the residents of other countries is also on the rise, which acts to reduce consumption and external demand. The embargo imposed by Russia on the import of foodstuffs could have an impact not only on the producers of the specific products but also on other branches. Yet against the negative background, the future outlook of several export industries has not deteriorated much. The indicators of the manufacturing industry and announcements of businesses indicate that manufacturers are continuing their business, looking for new markets and creating new products, adapting them to the new markets. A positive trend in the export of Latvian goods is the rise in optical equipment and instruments as well as pharmaceuticals. The growth in the production and export of these goods improves the structure and complexity of Latvian export.