Positive signs persist in Latvia's foreign trade

In September, Latvia’s foreign trade became notably more intense, with growing imports and exports. Exports posted a particularly steep increase, which may be seasonal, yet several indicators point to a revival of foreign markets and restored Latvian competitiveness.

Exports and imports have posted a nominal growth within a month of respectively 21.4% and 9.7%. Also in the third quarter overall the volume of nominal exports, compared to the previous quarter, has grown more rapidly than imports, respectively 2.0% and 0.6%. The rise in exports in September was mostly determined by grain exports; exports of metals (in part affected by prices), mechanisms and mechanical appliances also increased. In the quarter overall a gradual recovery of several of the traditional branches (textiles, wood pulp) has been observed.

In the trading of goods the import predominance over exports continued to shrink in September. Although no exact data on the trading of services are available at the present time, if the export of services remains stable, a positive overall trade balance is possible in the third quarter.

The gradual resumption of foreign demand is supported by the improvement in several indicators. For instance, in the third and fourth quarters, in the majority of EU member states, including Latvia, the loading of capacity increased, which means that businesses can make a fuller use of their production capacity. Although that could be evidence not only of the stabilization and gradual increase of demand and, in part, also of optimization measures and the use of capacity at the expense of its reduction, it is quite evident that other aspects of entrepreneurship are also receiving a more positive evaluation. For several months, the pessimistic outlook among Latvian entrepreneurs regarding the volumes of production and sales and the employment dynamics in the next few months has been improving. Although exact data on the new industrial orders are available only up to August, entrepreneurs' responses to the questionnaire item on export order dynamics became less pessimistic in October than in previous months.  Entrepreneurs are also expecting a reduction in stocks, which indicates an improvement in sales opportunities. For the third quarter running, there has also been more optimism among Latvia’s entrepreneurs regarding competitiveness both in the domestic and EU markets as well as in the markets outside the EU. A partial explanation for this may be the drop in prices and costs domestically, while in the main trade partners the drop in inflation is limited by both a less pronounced economic recession and a previously observed drop in currency values (e.g., in Poland, Russia, United Kingdom).