The second quarter of 2015 sees current account deficit of 148.3 million euro

In the second quarter of 2015, the current account deficit amounted to 148.3 million euro (2.4% of GDP). A quarter-on-quarter increase in the above deficit mostly resulted from the primary income account balance turning negative due to lower inflows of European Union (EU) fund financing.

Pursuant to the data revision policy, publishing of data for the second quarter of 2015 also incorporates data revisions for 2014 and the first quarter of 2015.

In the second quarter, the deficit of goods stood at 593.2 million euro (9.8% of GDP); more rapid growth of imports of goods over their exports contributed to a quarter-on-quarter increase in their net deficit. In the second quarter, exports and imports of Latvian goods continued on an upward trend, expanding by 2.9% and 2.7% respectively in annual terms. Optical instruments and apparatus, vegetable products and products of the chemical and allied industries were the groups of goods having recorded the highest pickup in exports, while various mechanisms and electronic equipment, products of the chemical and allied industries, as well as vegetable products were the groups of goods with the highest import growth.

In the second quarter of 2015, the services surplus amounted to 440.8 million euro, posting a quarter-on-quarter increase and reaching 7.3% of GDP. The pickup was mostly driven by higher spending of foreign visitors in Latvia associated with seasonal factors and the Latvian Presidency of the EU Council. Exports of telecommunications services and other business services also expanded. In the second quarter of 2015, the surplus of transport services decreased both quarter-on-quarter and year-on-year on account of more accelerated growth of imports over exports.

In the second quarter, the balance of the primary income account turned negative reaching 29.6 million euro or 0.5% of GDP on account of the paid-out dividends and reinvested earnings. Lower inflows of EU funds also contributed to the primary income account fluctuations. Conversely, the balance on the secondary income account turned positive (33.7 million euro or 0.6% of GDP) due to smaller transfers to the EU budget.

The financial account ran a surplus in the second quarter reaching 147.6 million euro or 2.4% of GDP. The central bank's portfolio investment in debt securities grew in the above period amounting to 184.8 million euro. Credit institution portfolio investment expanded by 200 million euro on the asset side as a result of their transactions in the primary and secondary market. In the second quarter, credit institution deposits with foreign credit institutions fell by 528.6 million euro, while the deposits received (mostly interbank) grew by 164.4 million euro. Inflows of foreign direct investment in Latvia amounted to 113.6 million euro or 1.9% of GDP in the second quarter. Major inflows of investment came from Sweden, Norway and the US; as regards breakdown by sector, financial and insurance activities saw the highest investment.

Chart. The main components of current account, % of GDP

Source: Bank of Latvia Statistical Database