Growth in services exports in March reduces the current account deficit
Compared to the first months of the year, the current account deficit has contracted amounting to 27.6 mil. lats in March. The development of the service sector and the growth of goods imports that was slightly faster than that of imports ensured that the current account deficit was small.
A positive development in March was the reduced negative balance of the external trade of goods as well as the increased value of services granted to non-residents. Deficit in the goods and services account dropped to 27.0 mil. lats. In the export of services, growth was promoted by an increase in transport services (primarily in cargo shipments by rail and ship). The Baltic Exchange Dry index, which characterizes the intensity of transports of dry cargoes for industrial purposes, and the Harpex index that characterizes all kinds of goods transports by sea both pointed to a growth in the services trade activity. Both indexes have picked up after the drop at the beginning of the year.
The negative balance (54.1 mil. lats) of the revenue account was determined by the profits of the foreign direct investor enterprises and the dividends they paid. No substantial changes were observed in the current transfers account or the capital account; 41 million lats was received in March from EU funds (primarily as a support to farmers) but greater inflows of funds are expected in the coming months after receiving the EU funds temporarily held back.
There was a small deficit (7.7 mil. lats) in the financial account in March. Operational data indicate that bank assets increased in this month because investments were made in foreign debt securities.
It is expected that a small current account deficit will remain for the coming months but the future trends in economic growth will be determined both by the developments in the external markets and the ability of Latvian entrepreneurs to adjust to change and perceive opportunities for growth.