Roller-coaster trend of Latvia’s exports in 2016

Roller-coaster trend of Latvia’s exports in 2016

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The trade turnover of Latvia increased by 10.8 percent m-o-m in the beginning of this year, as it was stated by the published inform of the Central Statistical Bureau of Latvia (CSB). Simultaneously, it has contracted in a rate of 3.3 percent y-o-y. And what about the rates of the trade in goods? The annual growth kept a negative tendency for three months in a row, in February. It was just 1.2 percent. And when it comes to imports and exports, correspondingly, news are not so good. The values for both only increased by 9.5 percent and 11.8 percent, in turn, compared with the last month.

During January and February there was a significant contraction in annual terms: the exports of goods, by 6.1 percent. However, the exports of electrical equipment, mining products, fabrics, mechanical appliances and textile articles actually made the largest negative influences. Exports of cereals, wood, chemicals, optics, medical equipment, and, above all, food products gave important and positive contributions, on the other hand.

In the reference period, it was reported to many major trade partners of Latvia a tremendous fall about the exports of good. It includes Poland, Lithuania, Germany, Sweden, the Russian Federation and Estonia. Meanwhile, during the first two months of this year, a progressive annual growth was conserved: the exports of goods to three important importers, The UK, Finland and Denmark. Another positive fact is that less traditional import markets showed significant numbers on the same matter: Morocco, Ethiopia, Mauritania, Kenya, Algeria, Turkmenistan, Saudi Arabia and the United Arab Emirates, Uzbekistan, Ukraine, Moldova, Switzerland, Bulgaria, France, Sweden and Malta.

Compared to January and February of 2015, mainly about the decreasing imports of mining products, mechanical appliances, base metals and electrical equipment, the imports of goods decreased by 8.5 percent, which is not good at all. A possible reason, without doubt, is the well-known weak demand for investment in manufacturing and commodities, but also the sharp fall of oil prices and the increase of the price of the US currency.

In the forthcoming months, a recovery in the Eurozone economy is highly expected. Nevertheless, the leap of such recovery is not going to be fast at all. A quick look on the concerns about the international stance and the stoppage of development in emerging economies makes us conclude such statement. It is important to note that the economic growth in China has been losing haste. Of course: in the long term, it will produce a domino effect on other Asian emerging markets. In many commodity segments of the international market, one can observe two trends: inventories build-ups and overproduction, especially in oil and base metal articles. The most probable consequence of this is (in addition to the weak international demand), clearly, a descendent force exerted on the price of such commodities.

As a result of low-priced imported manufacturing inputs, economies like Latvia’s (a predominant importing economy) decrease their actual account deficits; in first place, because of the decrease of prices. Naturally, there are some derived benefits to consumers: cheaper transportation prices and, subsequently, they can consume many and new services and goods. It boosts the domestic consumption and helps the economy to keep moving. But, in second place, cheaper commodity prices create a need for adaptation to countries that are focused on exporting natural resources. In sequence, it would low down their economic activity. For the moment, the descending tendency of the trade partners demand and the external environment may produce an awful consequence: the future of Latvia’s manufacturing sector could experience a tremendous fall, and the exports of goods as well.

Image courtesy of Richard Clark (Digimist) at Flickr.com
Image courtesy of Richard Clark (Digimist) at Flickr.com

However, there is still so much potential on Latvia’s businesses in some particular sectors. Even though there is a slow demand and so many challenges for national companies abroad, wood industry, for example, has been increasing its productivity into very positive levels. Latvia does not just export wood, but construction material and high added value articles that actually compete with other countries of the furniture industry, like Sweden or Norway.

The export capacity of other sectors, like food products and agricultural goods has also been preserved. Consumers in the whole world have been really aware of ecological impacts and healthy life styles, and it has made that the production of the goods in mention reached a peak in the last few years. Offers of healthy food, GMO-free and biodegradable disposals have dragged so much attention from the global market.

With the aim of increasing the exports capacity in the coming years, Latvia’s business abilities must reach higher productivity levels. The best way for it, without a doubt, is by improving technology and human capital. There is no other way. And, of course it requires a big investment from the State, national companies and multinational enterprises with keen vision in fast-growing countries like Latvia.

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