In June, Latvia’s foreign trade turnover had experienced a decline due to weak external demand and problems present within certain industries. Import and export values had declined that month. Under influence of seasonal factors, export volumes had declined for the majority of goods.
Compared with the same month of 2015, Latvia’s export value remained on the same level as the previous year (+0.4%). Import value, on the other hand, had declined by 4.1%.
Although export growth is symbolic, the growth structure for different categories of goods is heterogeneous. The most rapid increase was noted for cereals, alcoholic beverages, pharmaceutical products, wood and wood products as well as certain iron and steel products intended for export. The growth of the aforementioned products was reduced by a rapid decline of exports in the category of machinery and electrical equipment, optical equipment, mineral products and iron rods.
The total import index was affected the most by the decline in imports of machinery and electrical appliances (-10.1%) and mineral products (-16.5%). This points to the reduced role of re-exports. In general, it should be concluded that the negative import development dynamic was largely settled by the decline of capital and intermediate goods, which is also reflected in the changes of export development. This points to low investment activity.
In the first six months of 2016, a negative export development dynamic was noticed. The biggest export value decline (approximately 10%) was registered in January 2016. Export development dynamic remained varied in the months that followed. This is why export value had declined 2.8% in the first half year in comparison with the same period of the previous year. The largest negative influence on exports in the first half of this year was noticed for electrical machinery and equipment, as well as mineral products. The decline of exports of electrical appliances was related to the high base and changes to the law, which established reverse VAT payment procedure for electrical appliances. The decline of export value for mineral products remains affected by global prices for energy resources. At the same time, with imports reducing more rapidly than exports, an improvement of foreign trade balance was noticed. In the first six months of 2016, Latvia’s foreign trade turnover had declined 4.1%, whereas the trade balance had improved by EUR 177.8 million.
European Commission’s index report published in July shows that Latvia’s consumers’ and entrepreneurs’ confidence indexes remained stable and even higher in comparison with 2015. Confidence indexes also remain stable in Latvia’s partner countries – Lithuania, Estonia and Germany. It should be said, however, that the economic situation in EU member states and other countries of the world remains uncertain, which is made even worse by the results of UK’s vote on leaving the EU.
The International Monetary Fund downgraded UK’s economic growth outlook in its latest report. The largest negative influence is expected to appear next year. Although the UK is a valuable market for Latvia’s goods, especially wood and wood products, Brexit’s negative influence on Latvia’s exports is expected to be limited. After the decline in June, the British Pound sterling’s value is currently on the level of 2013-2014. The largest negative influence could be expressed through indirect negative effects. This particularly applies to lower economic activity in general. In June, Latvia’s export value to Britain had increased 17.8%.