Latvia export kept surging in May, moreover, forestry exports hit 100 million lats for the first time, economists say.

SEB bank macro-economy expert Dainis Gaspuitis:

Foreign trade stack to its fast expansion also in May. The most topical issue is now on the sustainability of export. In case global raw material price gains slow down, Latvian export growth should follow the trend. Exports are expected to keep growing in the upcoming months, also sustained by price gains that also include risks of dropping exports in case prices fall.

Whereas, the real export (excluding price fluctuations) will be much smaller. Export could grow more moderate and also more sustainable, as the number of new orders from export markets has dropped.

However, in a long run, the Latvian export development will be determined by work on boosting competitiveness and value added on export goods, as well as, focus on markets with great future prospects.

DnB Nord bank economy expert Peteris Strautins:

Export hit 524 million lats in May, which is the so far best performance, outperforming the previous one in March by 4.3%. Good news is May exports outrun the ones in the crisis low point in January 2009 twice. I dare say goods and services exports taken together will exceed eight billion lats.

Forecasts on export growth rates slowing down have not come true, with a year-to-year climb hovering around 40%, hit in the second half of 2010. Back then, it seemed to be short-term. The mistake seems to be delighting but there is a question why it appeared at all. And there are two explanations to this.

The first one is the delighting one – even the most optimistic analysts of economic processes had underestimated the vitality of Latvian companies.

The bad news is the stunning export performance is already partly sustained by growing re-export proportion.

Nordea Bank senior economist Andris Strazds:

In May, the export unexpectedly set a new record, even exceeding the very high level attained in March. This was mainly due to metal and engineering industries, whose exports overall surged by 24 million lats and due to very good performance of the timber industry, reporting a rise of 7 million lats, compared to the previous record in April. However, compared to April, the balance of goods trade declined, because the import posted a rapid growth, yet like in March, it was largely attributable to high raw material (metals, mineral products) and investment goods imports.

Overall, the Latvian economy is continuing a two-speed growth; however, now that the export has surged far ahead, investments are occasionally gaining momentum. At the same time, household demand remains sluggish.