Goods exports, without metals, maintains a good rate of annual growth

Compared to May 2013, the goods external trade turnover dropped by 1.0% in June.  With the goods exports dropping 2.5% and imports rising slightly (0.3%) month-on-month, the goods trade balance deteriorated slightly.

In June, the annual growth rate of goods exports remained slight and, with the deteriorating demand in the partners’ markets, export value posted only a 1.8% rise compared to June of last year. In June, practically all main groups of export goods suffered a drop compared to May; a positive rise was maintained only in exports of plant products, transport vehicles and paper products.

In export growth, the main positive contributor was the substantial rise in the exports of plant products: the wheat and rye mix to Algiers for 14.3 million lats, to France for 4.8 million lats and to the Netherlands for 4.3 million lats. The increase in the exports of transport vehicles was still ensured by the export of ships to Russia (another two passenger ships were launched by AS "Rīgas Kuģu būvētava"). In goods exports, the rate of annual rise remained positive for agricultural and foodstuffs products, mineral products, wood pulp and its products, paper products, construction materials, mechanisms and electrical equipment.  The stopped operations of AS "Liepājas metalurgs" had a continued negative effect on goods exports.  The annual rise in goods exports, not including the exports of metal products, was 7.7% in June, which continues to be a reasonably good indicator.

Goods exports continued to go down to all main trading partners, with the exception of Russia, the Netherlands and France (to the last two, there was a rise in grain exports). The confidence indicators published by the European Commission (EC) likewise point to unchanged evaluations by Latvian businesses of export order volumes whereas the indicators for the third quarter deteriorated both for evaluation export order volumes and competitiveness within the European Union (EU). The evaluation of competitiveness in both the domestic market and outside the EU improved.

Goods imports in June grew only slightly month-on-month, whereas year-on-year, there was a drop of 9.9%. That is related to the rapid drop in intermediate consumption goods and capital goods imports, which in turn results from the drop in the production amounts in export-oriented enterprises which, in the imports of goods, still cannot be compensated by the good growth in domestic consumption and the rise in consumer goods imports.

The latest business tendency indicators in European countries have been positive; the EU aggregated ESI (Economic Sentiment Indicator) and PMI (Purchasing Managers Index) likewise point to a stabilizing situation – also in our main trading partners. The gradually improving situation in Latvia’s largest export markets, including the euro area, where business and consumer confidence continue to improve for a third consecutive month as well as the stability of the goods export volumes in the conditions of dropping external demand give rise to the hope that the exports of Latvian goods will be able to retain the current volumes. For export growth in the long term, however, increase in production volumes as well as increase in the percentage of both technologically more advanced export goods and those with a higher value added will be needed.  Investments are required for that. And even though the international ratings agencies have raised Latvia’s credit ratings and their future evaluations, neither the statistics of non-financial investments, nor the data on foreign direct investment point to substantial activity in the area of investment, therefore it is increasingly important to build purposeful investment by the state and local governments in the infrastructure of production to increase Latvia’s attractiveness in the area in industrial investment.