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Tuesday 21.05.2019 | Name days: Ingmārs, Ernestīne, Akvelīna
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Biggest foreign investments in Latvia go to trade and woodworking industries

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUDirect foreign investments in Latvia reached EUR 237 million in Q3 2018, which is 3.1% of GDP, exceeding the average investment level of last year.

The biggest influx of funds was noted for trade, woodworking, real estate and construction sector. The largest volume of money came from Netherlands, Estonia and Lithuania, as detailed in the economic analysis of the Bank of Latvia published on makroekonomika.lv.

After formation of a surplus thanks to powerful export growth in the first half of the year, balance switched to negative in Q3 2018. The reason for this is trade balance deficit, according to Bank of Latvia economist Kristofers Pone.

Current account in Q3 2018 was EUR 444.4 million deficit or 5.7% of GDP.

The economist explains the main reason for trade balance deficit is the trade balance of goods – there was only a 1.0% increase in exports in Q3. Imports, on the other hand, have grown 7.7%, which is more rapidly when compared to the first half-year. The largest influence on deficit increase was noted for trade with countries outside of Eurozone. Trade with Eurozone member states was more balanced. Compared to last, year’s situation, it is worth mentioning trade with Russia, Poland and Lithuania, where deficit has been noticed.

Q3 was less beneficial for exports of services, which was affected by reduced export rates in finance (-25.1%) and construction (-10.4%) sectors. While decline of exports of financial services was caused by the reduction of foreign clients’ deposits in Latvia, it was still expected, whereas the rapid decline of construction services was unexpected. This may be explained with high demand on the domestic market and the limited capacity (especially with shortage of workers), as well as rapid decline of exports towards untraditional markets.

There has also been an increase for the volume of imported services, which remains ahead of exports of services (12.9% as opposed to 9.0%). Although the import rate for financial services remains negative, it is compensated by growing import rates in other sectors. Imports of ICT and other business services are also on a rise. Imports of construction services are also on a rise, which fits the general development of the industry. However, the proportion of these services in on the market forms only 1.5%. Import rates for transport services continue declining since the beginning of the year, reaching 9.4% in Q3. In spite of that, imports of air transport services continue increasing.

Opposite to what was experienced in the first half-year, trade data from Q3 shows weaker external demand than previously expected. The outcome of previously outlined risks (Brexit, US-China trade war, etc.) makes industry experts look towards the future with caution.


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