External trade retains moderate yet positive growth
Despite the continuing political instability in Latvia's eastern neighbours and the low demand in the external environment, in its external trade, a positive growth rate was retained.
In the first nine months of 2014, the goods export amounts increased by 2.0% and import dropped by 1.1% year-on-year. In September, the turnover of goods external trade grew by 14.0% month-on-month, posting a 12.7% increase in goods export and 15.2% in goods import.
Year-on-year, the goods export value has remained almost unchanged, dropping by a mere 0.3%. A positive annual growth rate was maintained for the export of foodstuffs, wood products, chemical industry and plastic products, construction materials, mechanisms, and power equipment. Month-on-month, export in September grew in almost all groups of goods, except the products of base metals and optical and similar equipment. Under the impact of seasonal factors, the most rapid growth was posted by the exports of plant based products (to Iran, Spain, Turkey and Denmark). In September, exports grew substantially to almost all of the CIS countries and most notably to Russia, Belarus, Uzbekistan and Kazakhstan. According to the operational information of the World Trade Organization, the Latvian export market shares in global imports continued to grow, testifying to Latvia's ability to react flexibly to a drop in demand in some groups of goods and in some countries. The expansion of Latvian exports this year is taking place primarily in the direction of those European Union countries that are no part of the euro area. In September, the year-on-year import increase by 2.5 % was determined the increase in the imports of both consumer goods and capital goods as a result of domestic demand activities. The year-on-year growth was retained in the imports of foodstuffs, textile products and wearing apparel, chemical industry products, wood, base metals and their products, mechanisms and electrical goods.
Even though in September exports to Russia increased by 10.7 mil. euro month-on-month, in nine months it has shrunk by 2.7% (or 21.6 mil. euro) year-on-year. The greatest nine-month drop in exports to Russia was experienced in transport vehicles (trailers and semi-trailers and other transport vehicles without mechanical transmission) and chemical industry products (medicines). A month-on-month export increase to Russia in September was mostly ensured by a rise in the export of alcoholic beverages and power equipment (electric motors, power generators). In the September exports to Russia, transport vehicles, animal-based products, wood, construction materials and textile products continued to drop.
The October data published by the European Commission indicate that evaluations of production trends in the future and export orders remain unchanged. The dropping value of the Russian rouble has a negative impact on the view of Latvian entrepreneurs of their competitiveness. On the other hand, the increase in the evaluation regarding the export volumes to be expected in the coming months indicates that entrepreneurs are not giving in to hopelessness but continue to work, looking for new opportunities to sell their production. Both activity and demand in Latvia's main export markets can still be characterized as weak. For further growth of Latvian exports, investments for increasing the productivity of enterprises are needed as are those for the introduction of new technologies, manufacturing of innovative products, improving export competitiveness and creating production with a higher added value as well as establishing new markets and expanding existing ones outside the EU, for example, in the Asian countries.