Latvian producers demonstrate sustained competitiveness
In September of this year, the turnover of the external trade of goods increased by 12.7% month-on-month. With exports growing by 23.1% and imports by 4.8% month-on-month, the goods trade balance improved and the excess of imports over exports dropped to 115.9 mil. euro in September. Year-on-year, the goods export value increased by 3.7% and goods import value decreased by 5.8%. This points to sustainability of the competitiveness of Latvian producers even in relatively unfavourable circumstances.
In September, goods exports were favourably affected by the substantial seasonal export growth by 114.8 mil. euro, including the exports of wheat and wheat and rye mixture, which increased 26 times over August. The notable increase in cereal exports was fostered by the rise in cereal prices in the global market and the highest ever cereal harvest in Latvia. Cereals were exported to Algeria, Saudi Arabia, France and Spain. In September, the hitherto growing exports of plastic products, mechanisms and appliances dropped month-on-month, yet the drop was compensated by an increase in exports of all other goods groups. The rise in the exports of base metal products was fostered also by the largest enterprise in the sector, "KVV Liepājas metalurgs", which, by using "Stena Line" ferries since the beginning of September, has managed to increase its exports to Germany. The use of these platforms has allowed the enterprise to reduce transportation costs, which is crucially important, given the stagnation in metallurgy throughout Europe.
According to the data of the Central Statistical Bureau (CSB), in nine months of this year, goods exports retained its year-on-year growth of 2.0%, posting rises in the exports of plant-derived products, wood pulp and paper products, chemicals, plastic products, construction materials, mechanisms and electrical equipment, optical equipment and various products. The greatest drop this year was experienced by dairy product exporters who have been unfavourably affected by the Russian embargo, the drop of milk prices in the global market and the lifting of milk quotas by the European Union (EU). Yet in this branch as well there are enterprises that manage to function and find new markets for their production. This year, Latvian enterprises began exporting dairy products to China, Egypt, Turkey, Georgia, Tunisia, Serbia, Japan, Belarus and other countries to which there were no exports in this period last year.
In the first nine months of this year, the goods imports have essentially remained at last year's level: there was only a 0.6% growth.
International organizations have reduced their predictions regarding the growth of global economy, pointing to weak investment and diminishing optimism regarding economic prospects in several developed and developing countries as the main risks impacting growth. The October data published by the European Commission, however, indicate that the evaluations of production trends in the future and export orders to Latvian entrepreneurs have improved and export amounts expected in the coming months have also received a more positive assessment. The competitiveness assessment outside the EU and domestically likewise indicates that entrepreneurs have not given in to hopelessness but continue to work looking for new opportunities to sell their production. The evaluation by entrepreneurs of competitiveness within the EU continues to deteriorate, however, which can be explained by the still weak economic activity and demand in Latvia's main export markets. Even though the atmosphere in the EU markets rather seems to be one of wait and see, the growth of some countries, for example, Poland, the Czech Republic and the Netherlands already has had a positive impact on Latvian exports and moreover in those groups of goods most affected by the drop in Russian demand and the value of the rouble.
The future growth of goods exports will be determined not only by the development of external demand and competitiveness of Latvian entrepreneurs but also by investments targeted at increasing the export capacity. The exporters have to work on exploring and identifying the specific needs of clients, increasingly developing the supply of niche products. An essential role in making investment decisions is played by the investment environment as well as improvement of credit ratings and stable taxation policies. Approving the budget is without a doubt an important factor in any further growth of foreign trade.