External complications do not impair Latvia's exports going uphill

Despite the complicated situation in Latvia's export markets, country's businesses do not stop to ascertain their ability to find new markets fast and effectively and to offer competitive products therein.  

According to the CSB's data, in July of the current year the turnover of Latvia's foreign trade in goods rose by 5.6% over the month, with exports and imports of goods expanding by 5.0% and 6.1% month-on-month respectively. In comparison with July 2014, in turn, the value of exports and imports of goods picked up 0.4% and 2.2% respectively.

The largest month-on-month growth in July was recorded for exports of machinery and electrical equipment (exports of monitors, projectors and TV apparatus to Lithuania and Spain), base metals (to Turkey and Algeria), articles of base metals (to Finland, Estonia, Lithuania, Russia, Sweden), agricultural products (meat and dairy products, fish, grain), prepared foodstuffs (mainly alcoholic beverages to Russia), and mineral products (oils produced from crude oil and bitumen minerals to Poland).

In the first seven months of the current year, exports retained their year-on-year growth 2.4%, with those of machinery and electrical equipment, building materials, products of the chemical industry, optical instruments and apparatus, wood, pulp of wood and paper, plastics and textiles all posting pickups.

The expansion in imports in July was primarily on account of growing volumes of intermediate and capital goods, and this gives rise to hopes for some momentum in exports in the coming months.

Speaking about the outlook for Latvia's foreign trade, numerous risks to further export growth are in place. A positive scenario of foreign trade growth is mainly threatened  by the slow pace of the global economic growth, which is not consistent with the expectations of acceleration. The negative signals emanating from China's economy, which is decelerating more than projected, give rise to concerns about the external demand dynamics. The economic decline and restrictions on imports in Russia as well as the volatile geopolitical environment are likewise curbing the development of exports and investment.

Nevertheless, despite quite unfavourable circumstances in Latvia's exporting environment, our businesses continue to demonstrate their capacity to competently make use of the state support instruments and to invest for the sake of stronger competitiveness and effective diversification of export markets. Even though certain stagnation has affected some of the sectors, overall real volumes of manufacturing and exports have not contracted notably.

There is no denying that the Russian embargo has brought about quite serious problems for the food industry this year; nevertheless, the Latvian food producers have managed to find new export markets in more than 35 countries. The dairy farming was one of the most hardly hit exporting industries, as negative pressure on it came from several sources, e.g. the Russian embargo, falling milk prices in the global market, lifting of the EU milk quotas. However, companies in this sector have also demonstrated their ability to operate and respond resiliently to foreign trade obstacles. The export data of July 2015 once again show that dairy product exporters do not give in and are actively looking for new markets for their output: in July exports of dairy products expanded on account of activities not only in the EU countries (Bulgaria, the Check Republic, Hungary, Denmark, Estonia, Lithuania, Poland, Italy, Finland and France) but also in Turkmenistan, Japan, Thailand, Morocco, Malaysia, Saudi Arabia and the US.

The same is true about fish processing, which continues to operate, irrespective of the obstacles in the Russian market; having received an approval from the China National Certification and Accreditation Administration, the industry exported sprats and cold-smoked salmon products to China already in July. Exports to China of fish fingers and burgers are also projected. At present, the very first container with sprats produced by the JSC Gamma-A is on its way to Peking; the sales will start there around mid-October, with more freight to follow in November or December.

Latfood is another company that, upon investing 3 million euro in production equipment and starting the production of an innovative product in the Baltic States, the so-called kettle chips, has managed to attain 80% capacity loading and export over 90% of its output.  

To maintain and accelerate the export growth, investment ranks first and foremost. It is decisive for improving productivity, producing new niche output and capturing new export markets.