A surplus of 14.5 million LVL was formed on Latvian balance of payments on current accounts in May 2012. May was also fruitful for Latvia’s exporters and service providers, says Bank of Latvia economist Ieva Brauksa.
Latvia’s foreign trade turnover increased in May. Low oil prices contributed to a slower import value growth, but export of different goods increased. Consequently, exports grew faster than import. The negative salvo of external trade improved, dropping down to 130.6 million LVL, the economist says.
She notes that after a small drop in April, salvo of external trade of services grew, reaching 89.4 million LVL in May. The influence of seasonal factors increased in May’s value of travel services. Compared with the previous month, railway, sea and air transport service value also increased. While, export of car transport services be limited in the future by stricter requirements and authorization checks of shipments to Russia, which increases transport expenses.
«May’s negative salvo was very small (2.8 million LVL), while transfers grew and now reach 58.5 million LVL, because there was a significant grant inflow (45.3 million LVL) from the EU in May,»- Braksa compiles the data.
It is also noted that the financial account was negative in May (74.8 million LVL). It was improved by long term inter-bank investment and obligation reductions, venting non-financial sector short-term deposits. Nonetheless, short-term interbank investments increased at the same time, and the inflow of direct investments was still important and made up 34 million LVL.
The economist says that the Standard & Poor’s rating agency increased Latvia’s rating in log-term and short-term obligations in local and foreign currency. This means that compared with other regions, Latvia can still be attractive to investors.
In relation to the capital account, Brauksa notes that a small negative salvo formed there in May (0.3 million LVL). However, seeing as though direct payments from EU funds have been restored, it is expected that new and old payments will be received in the coming months, and the inflow of money to the capital account will be much more significant.
Current data suggests that Latvia managed to preserve stable growth and strong export shares even during times when European countries still suffered from uncertainty about future development. This is why it is expected that Latvia’s payment balance on the current account will remain somewhat negative in the coming months and in 2012 in general.