For the first time, exports exceed 1 billion euro month-on-month

Despite the weak external demand and political instability in Latvia’s eastern neighbours, the Latvian goods exports in October managed to set a new month-on-month record, exceeding one billion euro. Compared to September, the external trade turnover in October increased by 6.7%. Within a month, with exports growing by 15.3% and imports contracting by 0.2%, the goods trade balance improved in October and the excess of imports over exports dropped to 82.0 mil. euro, testifying to the sustainability of the competitiveness of Latvian producers even in relatively unfavourable conditions.

Latvian exports in October grew 7.2% year-on-year, which is a good indicator, particularly in circumstances when the total demand in external markets is low.  In the first 10 months of this year, goods exports grew 2.5% year-on-year, posting a rise in the exports of foodstuffs, wood products, chemical industry products, plastic products, construction materials, mechanisms and power and optical equipment.  

In October, the greatest increase was observed in plant derived products (incl. wheat, wheat and rye mixtures that mostly were exported to Iran, South Africa, Germany and Lithuania) and food industry products, where the greatest rise was in alcoholic and non-alcoholic beverages and meat and fish products. The exports of power equipment, base metal products, wood and wood products, furniture, mineral products, optical equipment, textiles, construction materials and transport vehicles were also on the rise.

Even though Latvian exports are endangered by geopolitical risks, the weak growth of the euro area, weakening of the Russian economy and dropping value of the rouble as well as Russian economic sanctions, according to the World Trade Organization data, the Latvian export market shares in global imports continue to grow. Latvian entrepreneurs can achieve the rise in export market shares by diversifying their production and markets as well as by creating new products. The greatest export growth this year is happening in the direction of those European Union countries that are not part of the euro area, e.g., the United Kingdom, Sweden and Hungary. The Russian embargo has had little impact on the dynamic of the exports of Latvian goods; its effects are felt in only some groups of export goods – primarily in the exports of dairy products.

In October, the exports to Russia increased by 12.0 mil. euro month-on-month, yet in ten months time it has dropped by 1.4% (or 12.7 mil. euro) year-on-year. Compared to September, almost the same export volumes persisted in almost all groups of export goods to Russia. Some export goods, e.g., alcoholic and non-alcoholic beverages, chocolate, molasses and food products of flour, oil pies and other solid residue, electromotors and power generators, monitors and projectors, telephones, textiles etc. posted substantial growth.  

According to data published by the European Commission, the evaluation of export order amounts has deteriorated in November. Confidence data on the fourth quarter indicate that even though that evaluation has slightly improved, the outlook of entrepreneurs regarding their competitiveness continued to deteriorate – both domestically and in the European Union as well as outside it. The survey by "Citadele" Bank and research centre "SKDS", the "Citadele Index", indicates that business confidence has deteriorated notably within the last quarter, reaching the lowest level in the last three years. The pessimism of entrepreneurs is mostly promoted by the unstable geopolitical situation, weak economy in the European Union as well as other factors, for example, raising the micro-enterprise tax by 2% as of next year etc.  

In relation to keep Latvian goods exports growing, investments play a significant role in increasing productivity of enterprises, utilizing new technologies, producing innovative products, improving their competitiveness and putting out products with a higher added value, as well as in expanding new and existing export markets.  Foreign direct investment activity has been very low lately, probably determined by the geopolitical situation in the neighbouring countries to the east, which has a negative influence on business sentiments and promoting unwillingness to take on additional risks. Also, in order to be able to increase export amounts in the future, the ability to continue increasing productivity, improving the human capital and technologies will play an increasingly substantial role. To accomplish that, innovations and investments in education and science are necessary, but in Latvia they have hitherto been very low.

Despite the negative external background, entrepreneurs confirm in various surveys and interviews that they will not be satisfied with what they have accomplished and are planning to become even more active in external markets, moreover, predicting rising goods export volumes. Albeit cautiously, investments are being planned for many enterprises, primarily in various measures increasing efficiency.  At "Tech Industry 2014", president of the Latvian Association of Mechanical Engineering and Metal Manufacturing Enterprises Vilnis Rantiņš expressed an opinion that, taking into account the fact that new projects with high added value have been approved for more than thirty branch enterprises, it means new, substantial investments, new technologies, as well as a rise in work productivity and amount. All preconditions are in place for the metal manufacturing and mechanical engineering branch to double its production and export volumes. The branch could be positively influenced also by the possible resumption of work at "KVV Liepājas metalurgs" as well as by several other large enterprises that are modernizing and working on conquering new market niches, e.g., "Daugavpils Lokomotīvju remonta rūpnīca", "Rīgas Elektromašīnbūves rūpnīca" and others. The Latvian producer of chocolate truffles "Pure Chocolate" has begun exporting to the US and is expecting to launch new products next year as well as to strengthen its positions in the existing export markets and increase sales, including expanding its exports to the United States, the Middle East and Japan. "Food Union" has begun exporting to eight new countries, including the United Kingdom, Iceland, Uzbekistan, Ukraine, Mongolia, Lebanon, Libya and the United States; in March it is expecting to begin exporting to China..