On Latvia's Balance of Payments in June 2009
The current account surplus increased notably both in June and in the second quarter overall. The negative balance of goods continued on a downward trend in June under the impact of goods imports shrinking at a faster pace than goods exports. As previously, the steep deceleration in imports was on account of a substantial drop in the domestic demand. At the same time, the export performance indicators improved somewhat in June, with a slight rise recurring in some export commodity groups and decline moderating in others. The current account recorded a new positive trend: for the first time, the surplus in the services account exceeded the deficit in the goods account, thus bringing about a positive goods and services balance. This means that at last the costs of goods and services imports can be covered by the revenues from goods and services exports. In the second quarter overall and in June in particular, the rapidly growing surplus in the income account figured as a significant booster of the surplus in the current account. This indicator is substantially affected by heightened bank provision-making for doubtful loans, reflected as losses of banks and consequently also of direct investors. It is recorded as an outflow of foreign direct investment in the financial account.
The current account surplus recorded in the first half of the current year is expected to persist also until the year's end, pointing to a positive current account balance for the year overall, a logical outcome in the situation of ongoing adjustment for disproportionate developments incurred in previous years; to a large extent, the amount of the current account surplus will depend on the evolution of the income account.