Goods exports show higher growth than goods imports
The external trade turnover in July grew slightly, 1.8% month-on-month. The goods export growth was more rapid than that of goods import both month-on-month and year-on-year. Exports grew 2.5% and imports 1.2% month-on-month. The goods trade balance improved slightly and imports exceeded exports by 164.7 mil. lats in July.
The annual growth in the export value of goods remained substantial (+16.5%). In the breakdown by group of goods, export growth exhibited previous trends. Month-on-month, the exports of base metals, mechanisms and electrical equipment and mineral products grew most rapidly while the greatest drop in most important groups of export goods was experienced in the exports of wood pulp and its products, chemical industry products and plant derived products. The greatest annual growth in exports in July was observed in the products of the food industry, base metals, mechanisms and electrical equipment.
The annual growth in imports dropped substantially and was at 3.5%. That does not point to slackening business activity, because imports continued to grow month-on-month. The annual growth rate was brought down by the base effect (in July of 2011, there was a rapid rise in imports). The growth in imports is still defined by the rise in intermediate consumption goods and capital goods. That points to demand for raw materials for the manufacturing of export products as well as those to be sold domestically and for investment goods. A gradual increase in consumption goods is also observed however. Compared to June, the imports of mechanisms and electrical equipment, wood pulp and its products as well as food products have all gone up substantially. Year-on-year, there has been a substantial rise in the imports of wood pulp and its products, construction materials, food products and transport vehicles.
The economic situation in Europe has continued to deteriorate and the rates of economic growth have been slowing not only in the countries suffering from the crisis but also in Latvia’s main trading partners. Even though Latvia’s economic growth has been increasingly based on domestic demand and the export growth rate is slowing down it is not expected that exports will lose its important role in Latvia’s economic development. Latvia’s economic development will continue to be closely dependent on export opportunities, yet a successful export growth is threatened by the rise in purchasing prices of oil and other raw materials as well as economic development in Latvia’s main trading partners. The rising food prices, on the other hand, may have a positive impact on export. Trends in the euro area economy notwithstanding, the confidence indicators published by the European Commission indicate that the evaluation of export order volumes has improved slightly in August. The third quarter indicators have improved both in terms of export order volumes and competitiveness evaluation, including a substantial improvement of the business view of future competitiveness within and outside the European Union. That points to relative confidence among Latvian exporters as they continue to diversify their products and increase their market shares. In the latest world competitiveness rating published by the Global Economic Forum, Latvia has gone up five places, from 64th to 55th. An additional stimulus to Latvian economic development will also be provided by investments that have already been made and those expected. At first they contribute to the growth in imports but in the longer perspective, also in exports. A few examples suffice: to improve its competitiveness in the export markets, the poligraphy group Mūkusala will invest 2.9 mil. lats in a magazine printing line; the dairy processing venture AS Rīgas piena kombināts has held three tenders for purchasing a complex of liquid margarine production and packaging lines from Denmark and France at a total of about 4.5 mil. euro. The enterprise is also planning a procurement of thermal processing and fermentation of milk mixtures from Russia in the amount of 2.1 mil. euro. As the information published on the Procurement Supervision Bureau website, the Liepāja based SIA Natural Resources is planning to invest 2.9 mil. lats in establishing a biogas and cogeneration station.