Latest external trade data confirm the flexibility and ability to survive of Latvian exporters

In April 2014, the turnover of Latvian external trade goods dropped 2.8% month-on-month. Within a month, the goods export value fell by 1.8% and their import value by 3.6%. With the smaller drop in goods exports, the Latvian goods external trade balance improved somewhat.

In April, compared to March, it was the exports of plant based products, transport vehicles, products of the chemical industry and textiles that dropped the fastest. The drop in the exports of transport vehicles and their furnishings cannot be considered a trend, because the orders for this branch are unfortunately irregular and the reduction against March was determined by the increase in the exports of transport vehicles related to the ship export in March. The drop in the exports of the chemical industry products by 10.1 mil. euro month-on-month was primarily the result of the drop in the exports of medical products to Uzbekistan and the drop in the exports of biodiesel and its compounds to Finland.  In goods exports, base metals and their products, plastic products, products of the food industry, mineral products, optical equipment and appliances, mechanisms and mechanical appliances grew month-on-month.

Year-on-year, the export value of goods has grown slightly, only by 0.7%. In April, a year-on-year rise remained in practically all export goods groups important to Latvia, except transport vehicles, base metals and foodstuffs (a slight drop).

In the first four months of this year, exports retained a rise of  2.1% year-on-year, posting growth in almost all the most important groups of export goods, except base metals and their products and transport vehicles.

In the export structure by country, change is apparent, e.g., a drop in the demand for Latvian export goods in Estonia, Finland and Germany is compensated by a rather substantial rise in exports and growth in export market shares in the United Kingdom, Poland, Sweden and other countries where domestic demand remains stable. The flow of goods exports to the euro area in the first four months of the year has dropped by 4% and to the non-euro area countries (Denmark, United Kingdom, Poland, Sweden) exports have grown by 15%. Goods exports have risen also to the CIS countries: by 2%, including to Russia by 0.7%.

In March and April, a gradual drop in the export rate to Russia was observed year-on-year, yet in April, there was a 5.1% month-on-month rise in exports to Russia. In four months, there has been an overall drop in the exports to Russia of textile products and electrical equipment whereas the exports of foodstuffs and mechanisms have increased.

In four months, there has been a substantial rise (34.3%) in exports to the American continent; not to the USA, however (a drop of 1.8%), but to more exotic markets as Haiti where in January (for 5.5 mil. euro) and April (for a total of 10.1 mil. euro) mixtures of wheat and rye as well as various plastic goods were exported. Goods are being exported also to Brazil, Mexico, Venezuela and other countries.

According to the first quarter data, the shares of Latvian exports market in total global imports continued to grow, which points to the mobility of Latvian exporters and their ability to reorient their goods to other markets.

The value of goods imports has dropped by 4.6% year-on-year. In goods imports, a drop in intermediate consumption goods necessary for exports and investment or capital goods is mostly observed, which most likely is related to investor caution in relation to the uncertain geopolitical situation in the context of Russia and Ukraine.

The confidence indicators published by the European Commission indicate that in April the assessment of the amount of export orders improved slightly only to deteriorate in May. That  implies that producer optimism has dropped along with a possible downturn in demand in several trading partners. In view of the deterioration of the political and economic situation in the eastern neighbours, foreign and domestic investors have grown more cautious, and inadequate investment in the development of production may impede the increase in exports and overall economic growth. Yet the former dynamic of export market shares and export structure has become more diversified in recent years both with respect to the range of export goods and to trading partners, augmenting the resilience and flexibility of exports as they face possible economic blows.

In maintaining Latvian export growth, investments aimed at increasing the productivity of enterprises, making use of new technologies, producing innovative goods, improving competitiveness and creating products with a higher added value are of crucial importance. The May decision of Standard & Poor's to raise Latvia's credit rating, establishing stable rating forecast in the future, allows us to hope that investor confidence will be reinforced and inflows of investments so much needed for developing the export potential will be promoted.