External trade indicators testify to the sustained competitiveness of Latvian producers

In February 2013, the external trade turnover of Latvian goods remained almost the same month-on-month, with exports increasing by 1.9% and imports dropping by 1.6%. The annual rise in Latvian exports reached 9.6% in February, which is a good indicator, particularly against the background of the unstable external environment. Along with the stable rise in export volumes, the external trade balance of Latvian goods continued to improve, testifying to the sustainability of the competitiveness of Latvian producers even under relatively unfavourable circumstances.

In February, an annual rise remained the case in almost all export goods groups important to Latvia; a particularly healthy rise was observed in the exports of wood pulp as well as electrical appliances and electrical equipment. Owing to the good harvest and high cereal prices in the global market, the export value of wheat and wheat and rye mix grew rapidly also in February. Month-on-month, the fastest increase in goods exports was observed to Germany and Russia. Positive export rises both month-on-month and year-on-year have been observed in exports to the euro zone, testifying to the competitiveness of Latvian exporters.

The imports of goods dropped both month-on-month and year-on-year in February. Compared to February of last year, import value has dropped by 0.6%, which constitutes the first such drop within the last three years. This was primarily the result of the drop in the import value of mineral products and base metals. The drop in metal imports could be related to the drop in the full load capacity at AS "Liepājas Metalurgs".

According to the confidence indicators published by the European Commission, the small improvement in February was followed by deterioration in March by the evaluation of entrepreneurs of both Latvia and the European Union (EU) of the near-future prospects regarding the sales of production as well as export orders volumes. Analyzing the changes in the economic sentiment indicator  (ESI) of Latvia’s trading partners, it is obvious that confidence has deteriorated particularly in euro zone countries (Germany and Estonia) whereas confidence has improved in partners outside the euro zone. The survey data of Latvian producers in a breakdown by branch indicate that in the first quarter of 2013 confidence has deteriorated slightly in the woodworking and metal-working industries, whereas the optical and electrical equipment manufacturers as well as mechanical engineering enterprises are expecting an improvement in competitiveness both inside and outside the EU.

Both the retained optimism in the non-euro area trading partners and successful development of the above mentioned branches gives rise to hope that the total Latvian export volumes of 2013 will not shrink and exports will not lose their significance in Latvian economic growth too rapidly. Yet in 2013, the rate of goods export growth will be significantly lower than in 2012.

Given that the largest Latvian export branches, wood and metals, are currently facing a global-scale shrinking of production, it is essential to increase the share of other industries in Latvian export basket, because there is still untapped potential in this area. In order to increase market shares, the role of such competitiveness factors as the quality and complexity of exports etc. will continue to increase.