In the third quarter, the current account deficit was 190.3 mil. euro

In the third quarter of 2015, the current account deficit was 190.3 mil. euro (3.0% of gross domestic product (GDP)). The quarter-on-quarter increase in the deficit (148.3 mil. euro or 2.4% of  GDP in Q2) was mostly determined by the primary income account. It was negative for the second consecutive quarter and the correlation with smaller inflows of financing from European Union (EU) funds continued to increase in the third quarter.

In the third quarter, the goods deficit was 614.8 mil. euro or 9.6% of GDP (Q2: 593.2 mil. or 9.8% of GDP). Quarter-on-quarter, goods exports and imports rose equally fast (respectively by 4.1% and 4.0%). Groups of goods with the most substantial rise in exports are animals and animal-derived products, textiles, food industry products, fats and oils and plant-derived products. Goods groups with the biggest rise in imports are food industry products, chemicals and textiles.

The positive balance of services external trade (453.3 mil. euro or 7.0% of GDP) continued to grow compared to the previous quarter (440.8 mil. euro or 7.3% of GDP), which was mostly fostered by the spending of foreign visitors to Latvia.

The negative balance of primary income has risen to 87.9 mil. euro or 1.4% of GDP compared to the previous quarter (29.6 mil. euro or 0.5% of GDP). The rise in the negative balance was influenced by the fact that in the third quarter, there was hardly any inflow of the financing from EU Agricultural funds, which must be accounted for in the primary income account and the negative balance of reinvested profits and dividends remained unchanged quarter-on-quarter.

The positive balance of secondary income, i.e. 59.2 mil. euro or 0.9% of GDP rose over that of the previous quarter (33.7 mil. euro or 0.6% of GDP), which was fostered by the rise of the personal and other current transfers received.  

The positive balance of the capital account, 141.4 mil. or 2.2% of GDP contracted (Q2 253.3 mil. euro or 4.2% of GDP). This resulted from the contraction of flows of EU financing earmarked for investment in this quarter.

The balance of the finance account was negative in the third quarter (136.4 mil. euro or 2.1% of GDP). To a great extent, this was impacted by the increase in Latvian government-emitted securities (494.8 mil. euro) and the continuing inflows of foreign direct investment (158.7 mil. euro or 2.5% of GDP). The largest inflows were from Cyprus, Estonia and Luxembourg. Investments of Latvian credit institutions in debt securities emitted by foreign governments dropped as did deposits attracted from non-residents.

Chart. Main components of current account, % of GDP