In October, the rise in current account deficit determined by one-off factors
In October, the Latvian current account deficit rose slightly, to 46.4 mil. lats as a result of a rise in goods imports under the impact of some one-off transactions. As these are not factors that have a lasting influence, no substantial increase in the current account is expected in the coming months.
The goods external trade negative balance rose to 134.9 mil. lats, but the services trade positive balance to 84.4 mil. lats, as a result of the growing value of granted travel, construction and financial services. Drops are still observed in the exports of transportation services (particularly by air and rail). The drop in rail transport services resulted from short-term factors, i.e. Russian imposed restrictions because of repair work on rails. In the longer term, the development of transportation services will be closely related to changes in the external economic environment that determine demand for transport services.
In October, Latvia received 47.8 mil. lats from European Union (EU) funds (mostly from the European Regional Development and Cohesion funds). As a result of fluctuations in EU money transfers, the inflows of this funding were smaller than in previous months and thus the positive balance of current transfers dropped (to 17.2 mil. lats), and the positive balance of capital account was small (41.9 mil. lats).
A 36.3 mil. lats surplus formed in October in the financial account. Albeit the inflows of direct investment in Latvia are not as big as observed last year, in the first three quarters of this year they were at an average of 3.5% of gross domestic product, and in October direct investments grew in comparison to previous months (61.5 mil. lats), moreover the positive evaluation of Latvia by credit rating agencies point to the likelihood that direct investment will continue to grow in subsequent periods as well.