External trade in August testifies to the power of Latvian cereal exports
According to the information from the Central Statistical Bureau, the turnover of Latvian external trade of goods in August 2016 increased by 8.5% month-on-month, with the goods export and import growing respectively by 9.9% and 7.4%. Compared to August 2015, the export value of goods increased by 9.7% and import value dropped by 0.7%.
In August, the export value of goods reached its highest level since November of last year. Goods exports benefited from the substantial exports of plant-based products for 91.7 mil. euro, including cereal exports to Algeria, Saudi Arabia, the Netherlands, Spain, Germany and France for a total of 58.2 mil. euro and rapeseed exports to Germany, Denmark, Finland, Lithuania, Norway and Sweden for a total of 16.7 mil. euro.
The substantial increase in cereal exports was fostered by a rise in cereal demand in the EU market and the record and the stocks of last year's record harvest in Latvia. In August, a greater or smaller month-on-month increase was observed in most groups of goods. Year-on-year, growth was positive for plant-based products, base metal products, transport vehicles, chemicals, animal-derived products, wood, foodstuffs and textiles.
Owing to the good export indicators in August, the drop in goods exports in the first eight months of 2016 diminished year-on-year and was 1.5%. The year-on-year growth in goods exports is still unfavourably impacted by the drop in the exports of mineral products, mechanisms and electrical equipment, textiles and base metal products. A positive contribution to the growth of goods exports was provided by plant-based products (primarily, cereals, rapeseed and vegetables), transport vehicles (primarily, the one-off transaction with the yacht in July), pharmaceuticals, wood products, animal-derived products (primarily, fish), foodstuffs and construction materials. In a breakdown by country, the greatest decreases in goods exports were observed to Lithuania, Russia and Poland, whereas the greatest increases were to Denmark, Sweden, Germany, Uzbekistan, Kenya, Estonia, France and Saudi Arabia.
Evaluating the prospects for Latvian external trade in 2016, no substantial growth in goods exports is expected. Judging by a study conducted by "Citadele Index" and other business surveys, Latvian entrepreneurs are not particularly optimistic overall and the greatest most pronounced pessimists are the enterprises of exporting branches. In entrepreneurs' opinion, the negative impact on export growth is not limited to the weak external demand in the trade partners; economic and geopolitical problems in the external environment, including the aggressive policies of Russia; the many unknowns related to the United Kingdom leaving the European Union; the drop in the exchange rate of the rouble and the British pound; the conflicts in North Africa and the Arabian peninsula and uncertainty regarding the outcome of the US election but also the lack of a stable taxation policy and bureaucracy, which is a crucial obstacle to Latvia's competitiveness. The export of agricultural and food products is unfavourably influenced by the developments in the global dairy market where the consequences of the Russian embargo and lifting of the milk production quotas are still felt as are the drop in the value of currencies of some countries and overproduction.
The geopolitical turmoil of recent years – the sanction war with Russia, Brexit, the war in Syria and flood of refugees in the direction of Europe – has changed not only Latvian but also global business environment, where transformations are inescapable and everyone will have to learn to adapt to them. As a result of a weaker demand, entrepreneurs have to increasingly rack their brain as to how the habitual export and import markets could be replaced, where new trade partners could be found and how productivity might be improved.
Despite the multitude of problems, there are enterprises that do not intend to rest on their laurels and that are planning to increase the proportion of export even more, reinforcing and expanding their positions both in Scandinavia and in Western Europe, which are considered prospective markets, and increasing their activities in Asia.
Even though there is no recent information on large and extensive investment projects, some branch enterprises have announced their investment plans. Avoti SWF, for instance, is planning to invest 10 million euro in establishing a production unit for wood shavings granules; by purchasing new production equipment for 4.5 million euro, Stiga RM is planning to increase the full load capacity of its plywood factory; similar are the plans of Kronus, which produces wooden pallets by investing 1.1 million euro; the Jelgava region grain farm Fito-AL is planning to purchase a new first-stage processing complex, investing 1.9 million euro in this project. The dairy processing company AS Jaunpils pienotava is planning to modernize production, investing over half a million euro in new equipment. The confectionery and snack producer Orkla Confectionery&Snacks Latvija has invested 1.6 million euro in new candy production equipment in its company Laima, increasing its production capacity both for the domestic and export markets.