Some enterprises boldly invest despite the uncertain external environment

The Latvian external trade indicators are hardly surprising, given that export opportunities are still being curtailed by the uneven growth of Latvia's main external trade partner and the weak external demand.

According to the Central Statistical Bureau (CSB) data, the goods export and import values in June dropped by respectively 3.1% and 1.8%, month-on-month. Goods exports have remained almost unchanged year-on-year, rising by only 0.4%, but the goods import value has dropped by 4.1% year-on-year.

Month-on-month, the largest increase was observed in foodstuffs (including daily products, meat and fish products and alcoholic beverages), electrical equipment and electrical appliances, construction materials and furniture.  The largest drop, however, was unfortunately experienced by the groups of goods hitherto positively supporting export: cereals, base metal products and wood products.

In the first six months of this year, goods exports have dropped by 2.8% year-on-year.  The bulk of the negative contribution to goods exports came from mechanisms and electrical equipment, mineral products and textiles, whereas the positive contributors were the exports of cereals, chemicals, wood products, foodstuffs, transport vehicles and construction materials. Goods exports have mostly decreased to our traditional markets: Poland, Lithuania and Russia, whereas the increase was the largest to such new markets as Uzbekistan, Kenya, Saudi Arabia and France and also to some of the traditional partners: Estonia, Denmark and the United Kingdom.

Along with manufacturing, the situation in goods exports improved slightly in the second quarter. The improved result was both on account on rising prices in the global market and continuing growth in the most important branches of export (wood industry, the production of electronic and optical equipment, metal products manufacturing), which, even under the conditions of growing competition, has allowed the exporters not only to preserve the existing export volumes but also to increase the sales of their production. The negative impact of Russian imposed sanctions is also gradually diminishing in goods exports, without creating additional drops in the exports of goods affected by sanctions.

Important for economic growth are still the export opportunities influenced by economic and political processes in the external markets. The rather good manufacturing indicators, as well as the EC business confidence data, which point to expectations of export order increases in the third quarter, let us hope for a slightly more positive growth in goods exports.

Investments, which are currently stagnating, are playing an increasingly important role in maintaining growth in Latvian goods exports. Given the economic and political uncertainty in the external environment, private investors are delaying investing and the investments of the public sector have been negatively impacted by the disruption in the flow of funds from the European Union (EU).  

Despite the uncertain external environment, several bold enterprises from various branches are making or planning to make investments in the expansion of enterprises and acquisition of new markets. For example, "Orkla Confectionery & Snacks Latvija" is investing 1.5 million euro in perfecting the "Laima" marshmallows and jelly candy. The metal processing enterprise SIA "Locitech Production" plans to build a new production unit in Jelgava by the end of the year to increase export volumes. The water heating radiator producer SIA "Lyngson", which exports its production to Sweden and Norway, is about to build a new production building in Olaine.  Concentrating on increasing the full load capacities of cereal reception and storage, the cereal processing enterprise "Dobeles dzirnavnieks", is planning to invest seven million euro in various innovations.  AS "Latvijas Maiznieks", by investing more than 10 million euro in its production unit, has received both ISO 22000:2006 and the prestigious food quality BRC certificate, which opens up wide export opportunities to more than 100 countries whose retail chains recognize this quality standard.