Latvian exporters must look for new niches for their products
According to the data of the Central Statistical Bureau (CSB), the external trade turnover of Latvian goods in February dropped by 0.3% month-on-month. Within a month, the export value of goods diminished by 2.0% and their import value increased by 1.2%. In these circumstances, the success of Latvian exporters in their search of new markets will be of an increasing significance.
In the first two months of the year, exports maintained an increase of 0.7% year-on-year, posting rises in the exports of mechanisms and power equipment, mineral products, chemical industry products, construction materials, wood, paper, plastics, base metal products and furniture. In February, there was a month-on-month growth in mechanisms and power equipment, plastic products, furniture, construction materials and transport vehicles. The greatest drop was suffered in the exports of base metals and their products, primarily resulting from the contraction in the exports of iron waste and scrap metal. This contraction could be related with the resumption of work at "KVV Liepājas metalurgs" and it buying the necessary raw materials from those Latvian scrap metal suppliers who used to export their product up to now.
The exports of goods to Russia in the first two months of the year have dropped by 42.2 mil. euro year-on-year. The greatest increases were experienced in the exports to Lithuania, the Netherlands, USA (a new market for the electric appliances), the Czech Republic, Rumania, Bolgaria, Hungary, Denmark, the United Kingdom, Kazakhstan, and Belarus.
The import value of goods continued to drop year-on-year. Almost all largest groups of goods posted a drop in goods imports, with the exception of base metal products that underwent a substantial increase in February. The rise in the imports of iron and non-alloyed steel semi-finished products is related with the purchases of raw materials from Belarus and Russia for the production needs of "KVV Liepājas metalurgs".
Last year, the Latvian entrepreneurs managed to achieve rises in exports by increasing exports and expanding their market shares in the European Union (EU) and in less explored markets outside the EU. The stabilizing of the economic situation in the euro area and the Nordic countries, which are essential markets for Latvian exporters, and "KVV Liepājas metalurgs" resuming work could partially compensate the external risks related to the drop in Russian demand. The Russian sanctions have not had a crucial impact on the overall dynamic of Latvian exports, yet Latvian exporters are facing the negative effects of the sanctions indirectly: for instance, as a result of a weaker demand, competition is heating up in the EU markets. The producers in the Latvian export sectors will have to keep improving their competitiveness, generating products with a higher added value, as well as seek new niche products and markets.
Even though a rapid rise in exports against the current level is not expected in 2015, the efforts of Latvian exporters in diversifying the goods supplied and increasing their market shares will help them to maintain the current achievements and prevent a decrease in export volumes. Latvian producers have already proven that, under crisis conditions, they can mobilize themselves and improve their competitiveness. In all sectors there are already enterprises that have found their place in the European or global market. The geopolitical crisis in the neighbouring countries to the east and the drop in the demand of several CIS countries will bring adjustments to the exports both with regard to the range of export goods and to trading partners, thus decreasing business risks. The drop in the value of the euro will allow the exporters in the euro area, including Latvia, to become more competitive in the global markets, thus maintaining growing exports. An increasing external demand could be one of the factors that would stimulate investment activity in the production sector, which is necessary to increase the export potential.