Latvian goods external trade balance improved in November
In November 2013, the external trade balance of Latvian goods improved, yet it has happened as a result of both exports and imports dropping (respectively 6.7% and 9.0%) month-on-month.
After increasing for three consecutive months, the export value of goods dropped again in November, contributing to the decrease (by 7.7%) in the export value of goods also year-on-year. Month-on-month, the exports of many groups of goods decreased. Only the exports of foodstuffs, base metals and their products, mechanisms and electrical equipment.
The increase in the exports of base metals and their products is a positive sign that might point to a recovery in this branch and successful functioning of other base metals enterprises after the production of "Liepājas metalurgs" was halted. The exports of foodstuffs industry products have grown substantially, but mostly on account of the rise in exports of alcoholic beverages to Russia.
Overall, the dynamic of the goods export indicator in 2013 is positive, despite the stagnation in several export markets essential for Latvia and problems resulting from the developments at "Liepājas metalurgs".
In 11 months of 2013, exports maintained its 1.8% growth year-on-year, demonstrating increases in almost all of the most important groups of export goods, except base metals and their products, transport vehicles and plant-based products.
Evaluating the results of 2013, the representatives of several industries have admitted to having been able to improve their positions in the export markets, which is supported by the increase in Latvian market shares in world's imports. Russia's decision to call off the ban on pork imports will also have a positive effect on goods exports, for it will provide for the opportunity to increase exports to our eastern neighbour.
Goods imports in 2013 by and large maintained the level of 2012, which can be evaluated from two different perspectives. On the one hand, weaker imports continued to improve the goods external trade balance and could also indicate that Latvia's dependence on imports has decreased: to an ever larger extent, we can replace imported goods with ones produced in Latvia and the drop in goods imports points to reduced re-exports, e.g., in the car market. On the other hand, the fall in imports is related to a weaker investment activity, yet investment is necessary for sustainable growth.
As the economic situation in the euro area and Nordic countries, which are crucially important markets for Latvian exporters, stabilizes, goods exports will continue to rise. At the beginning of 2014, a rapid rise in goods exports is not expected: it will be small, given that 2013 was a weaker period in terms of investment activities and entrepreneurs had maintained a wait-and-see position in regard to investing in enterprises to increase their capacities or improve their production processes. The improvement in business tendencies in European countries as well as the sustained growth of the Latvian economy in combination with improvements in international evaluations and joining the euro area could act to increase investment activity in the production sector, which is necessary for increasing export potential, and, as early as the second half of this year, it could foster an increased rate in goods export growth along with a rise in demand in the export markets.