Latvian goods export does not have a serious engine

According to the data of the Central Statistical Bureau, in July 2016, the Latvian external goods trade turnover dropped by 2% month-on-month, with goods export and import dropping by 3.0% and 1.1% respectively. Year-on-year, the export and import value of goods dropped by7.4% and11.9% respectively.

Goods export data are worrisome, for in July, just like in June, it was the groups of goods that up to now were the positive supports of export: wood and wood products, base metal products and cereals. The greatest rise in July was posted by transport vehicles as a result of exporting one yacht-trimaran for 39 million euro, as well as the exports of optical, medical and measuring devices. Even though the export of the yacht protected goods exports against a greater drop and, without a doubt, it can be classified under exports of goods with a high added value, it still looks like a one-off transaction and will not be able to boost goods export growth in the future.

In seven months of 2016, goods exports have dropped by 3.2% year-on-year with mechanisms and electrical equipment, mineral products, textiles and base metals as the greatest negative contributors.

A positive growth in seven months was retained by cereals, transport vehicles, chemicals, wood products and foodstuffs. The drop in goods exports resulted from a drop in the flow of goods to the countries of the European Union (EU) and Commonwealth of Independent States (CIS).  

A rise in goods exports in the traditional Latvian markets is slow, if it happens at all, yet the geography of the markets for products of Latvian enterprises keeps gradually expanding, thus absorbing the possible risks of economic and political turbulence in the markets of different countries. Latvian entrepreneurs, however, have not been able to fully compensate the drop in demand in the markets in Russia and some European markets.  

In recent months, exports have expanded to various Middle Eastern and North African countries. A new export market for Latvia is the United Arab Emirates, to which different groups of goods are exported, including mechanisms and electrical equipment and their parts, wood products, cereals, wood products etc. 

In the USA, too, the range of goods produced in Latvia keeps expanding, including various foodstuffs (e.g., dairy, meat, fish and confectionery products, beverages and alcohol and candy), as well as household chemicals, cosmetics, base metal products, optical, medical and measuring devices, toys and sporting goods etc.

Owing to vigorous activities by Latvian agricultural cooperatives and a very good last year's corn harvest, this year has allowed Latvian goods to conquer the markets of several African countries, for instance, in Ethiopia, Kenya, Uganda and Senegal where corn was sold in the amount of several dozen million euro.

Along with acquiring new markets, the conquering of the Chinese market is continuing. In the structure of exports to China, the traditional groups of goods (wood products, base metal products and electrical equipment) in the last two years have been supplemented by different food and agricultural products, including dairy, meat and fish products. Even though the proportion of foodstuffs in the exports to China is rather small, it has a tendency to increase. The assortment of foodstuffs keeps expanding, now ranging from sparkling wine and juices to cheese, ice cream, candied fruit, chocolate and marshmallows. In China, Latvian fish products are also well liked: sardines in tomato sauce, mackerel filets and sprats in oil.

In order for Latvia to continue to retain and increase export growth, investments, new niche products and new markets are of utmost importance. Let us remember that Latvia is a small country and cannot flood the markets of big countries (China, USA) with huge amounts of goods. The great distances from Latvia to China or the USA involves great transportation costs, therefore goods with high added value are more suitable to such markets.