The prospects for Latvia's exports in the upcoming months should be viewed with caution

In March 2013, Latvia's foreign trade turnover grew by 10% despite the low demand from some trading partners. The value of the exports and imports of commodities increased by 5.3% and 14.0% month-on-month respectively.

Although the annual growth of the commodity exports remained positive in March (2.6%), as a result of the weakening demand in the markets of partner countries and the base effect, the rate of growth decelerated significantly. The rises in the exports of products of the chemical industry, agricultural and food products, paper and articles of paper, building materials, machinery and equipment contributed positively to the annual growth of the commodity exports. Conversely, the annual growth rate of exports was dampened by a decline in the exports of transport vehicles and mineral products.

According to the preliminary estimates by the World Trade Organisation, Latvia's market shares in the global imports continued to expand in the first two months of this year, suggesting that Latvia's exports are sufficiently diversified and the exporters have so far been able to successfully address the weakening demand in some commodity groups and certain countries. Some examples: the exports of "Laima" and "Staburadze", Latvia's largest producers of sweets, have expanded by 22% in the first quarter of 2013 year-on-year. Exports have grown significantly to Israel, Germany, USA and Mongolia and it has been achieved through both increasing the variety of goods offered and strengthening the company positions in the export markets. After more than 2.5 years spent on building cooperation, Latvian cranberry concentrate produced by "Solepharm" ltd. will now be also available in Western Asia, in Kuwait. The JSC "Latvijas Balzāms" has been persistently working on expansion of its export network and has started the exports of its new vodka brand to China.

Month-on-month import growth was reported in March for practically all groups of commodities, except base metals. The steepest rise was observed in the case of the imports of motor vehicles, mineral products, including electricity and oil gas and gaseous hydrocarbons. The decline in the imports of base metals in March was most likely related to the scale-down of production by the JSC "Liepājas metalurgs" and the associated decrease in the required raw materials.

Latvia's export trends for the coming months should be viewed with caution because of the data reported from manufacturing in the most recent months, external developments and complications in the operation of the JSC "Liepājas metalurgs". The confidence indicators published by the European Commission also show deterioration in the outlook on new export orders in April for the second consecutive month for Latvia's ESI (Economic Sentiment Index). Moreover, confidence indicators for the second quarter have also weakened in the case of new export orders and competitiveness. The "wait and see" approach taken by Latvian businesses in the area of investment activities has a negative effect on imports. As a result, significant downward risks to the potential development of both the exports and the imports of commodities remain in the nearest future. In addition, the falling investment activity in the manufacturing sector deepens the concerns about the future prospects.

On the other hand, a positive contribution to exports in the future could be made by the signing of the Trade and Investment Partnership Agreement between the European Union (EU) and the USA. Latvian businesses would benefit most from the decrease of the non-tariff barriers in sectors like manufacture of pharmaceutical products, prepared foodstuffs, wood industry etc. The signing of such an agreement would benefit not only the businesses directly exporting to the USA but also the businesses producing and supplying raw materials and components to other EU companies subsequently exporting the finished goods to the USA.