11.05.2012.

External trade data in March: the economy still flexible and resilient

The Latvian external trade data for March 2012 confirm that the Latvian economy is still flexible and resilient. The exacerbated problems in the euro area have not put a stop to Latvia's economic growth and in March the turnover of Latvian goods external trade grew 9.7% month-on-month, including an 11.6% growth in exports, and 8.2% in imports. Over one year, the export value of goods has increased 10.3%, and the import value of goods has grown 8.0%. The slowing of the annual growth rate of imports and exports is attributed to the high base of the previous year.

The Latvian goods exports continued on the rise. The monthly indicators in March were under the favourable impact of the growth in the exports of wood pulp and wood products, transport vehicles and their equipment, plastics and their products, products of animal origin, textiles and textile material as well as pharmaceuticals.  The substantial increase in the exports of transport vehicles was the result of exports of ships filling an order of the Scandinavian fishing branch.

From the yearly perspective, the fastest growth rate in exports was maintained by mineral products. Growth continues to be stable in the exports of metals and metal products, because. after the completion of reconstruction in the largest enterprise of the branch, AS "Liepājas metalurgs", the metal production volumes have increased substantially. A factor in a continued increase in metal exports may be the new credit line, in the amount of 8.5 million, granted by SEB bank to SIA "Tolmets", the most influential base and non-ferrous metal processing enterprise in the Baltics, for expanding exports outside Europe to Turkey, India, Vietnam and Taiwan. In 2011, SIA "Tolmets" exported more than 90% of its production to Spain, Switzerland, Italy, the Netherlands and Germany as well as Turkey and East Asia. Growth is relatively stable also in the exports of wood pulp and wood products where the annual increase in March was at 12.9%, which could justify last year's investment earmarked for raising productivity and increasing capacities in this branch.

Despite the positive results posted by manufacturing and external trade at the beginning of the year, the confidence indicators published by the European Commission point to worsening evaluation in April by entrepreneurs both in Latvia and across the European Union of the immediate prospects of the branch, which may find reflection in both the industrial output and export data of the coming months. The confidence indicators for the second quarter have deteriorated in evaluating both the order volumes and competitiveness.

Just as before, the development of goods imports is being impacted by production growth, through increased imports of intermediate consumption goods and capital goods. In March, in comparison with February, the increase in imports was primarily on account of the imports of transport vehicles, products of plant origin, mechanisms and mechanical equipment. The growth in the imports of transport vehicles in March was determined by the imports of land transport vehicles and their parts whereas in April the purchase by the subsidiary of "Latvijas Dzelzceļš", "LDz Cargo", of cargo railway cars may play a significant role. "LDz Cargo" will not stop at this purchase and has already announced a procurement of 200 new platforms.

The trends in the economy and recently also politics of the euro area are hardly a cause of optimism. Continued growth of the Latvian economy will continue to be closely tied to export opportunities and the possible risks are primarily related to the developments in its main trading partners. The Krievu Island project (territory of 56 ha), which involves the development of wharfs for the handling of four types of bulk cargo (coal, metal, ore) is worth mentioning. Within the project, it is expected to also build all necessary motor roads, railway access roads and utilities in the territory of the port. This project may contribute to an increase in imports in the near future and to increased exports further along.

On 2 May, the international ratings agency Standard & Poor’s raised Latvia's credit rating one notch. With this decision, Standard & Poor’s returned Latvia's credit rating to investment grade. It is also an important overall assessment of Latvia's economic potential. At the moment, Latvia has the fastest growing economy among the European Union member states. If the upward risks of GDP projections come to pass and robust growth continues also in the coming quarters, Latvia could become increasingly attractive to foreign investors, including international businesses.

APA: Pelēce, D. (2022, 27. may.). External trade data in March: the economy still flexible and resilient. Taken from https://www.macroeconomics.lv/node/2227
MLA: Pelēce, Daina. "External trade data in March: the economy still flexible and resilient" www.macroeconomics.lv. Tīmeklis. 27.05.2022. <https://www.macroeconomics.lv/node/2227>.

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