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Monday 16.07.2018 | Name days: Hermīne, Estere

Economic Diary of Latvia. Exporters set a historic record

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn spite of the prolonged political conflict and unstable external economic environment, exports of Latvian goods demonstrated the most rapid climb since 2011. In addition, the value of exported goods has exceeded EUR 1 billion, reports Finance Ministry.

Foreign trade turnover has increased 6.7% this October, demonstrating export growth of 15.3% and import reduction of 0.2%. In actual figures export growth reached EUR 1.053 billion and that of import – EUR 1.135 billion.

Electrical equipment and appliances sector demonstrated a significant increase – 29.9%. This was mostly provided by exports of telephones (simultaneous increase of imports in this position demonstrates the growth of re-export). The alcoholic and non-alcoholic drinks segment demonstrated export growth of 41.8%. Because of good harvest this year, exports of grains from Latvia increased by 28.6%.

Observers note that exports have increased to and from CIS countries.

What is surprising is the fact that export of products to Russia has increased 7.8% in spite of the embargo and decline of the value of the Russian rouble.

The end result was mostly influenced by export growth of strong alcohol. Russia remains Latvia’s second most valuable partners. With a market proportion of 11.9%, it is second only to Lithuania.

Exports of products under embargo in Russia continue to decline. Compared to the same period of last year, exports of fish products declined by 40% in October; exports of dairy products declined by roughly a quarter.

Transit is one of the key positions of Latvia’s exports, and Russia remains the main partner in this area.

Frightening predictions from auditors

If the transit of Russian products ceases in Latvia, the country’s railway industry will lose 43.7 million tons of cargoes, as noted in the survey carried out by EY. As comparison: Latvijas dzelzceļš plans this year’s cargo turnover at 45 million tons.

Results of the survey were presented to members of Latvian Transit Business Association on December 9th. In the event of the worst case scenario, Latvian enterprises would lose turnover worth EUR 1.3 billion, the country’s GDP would decline 1.7%, employment would decline by 1.1% and tax revenue would decline by 2.4%.

Experts have also calculated losses should Russia cease transit of oil and oil products – Latvia would lose 18.8 million tons of cargoes and turnover of enterprises would decline by EUR 803.8 million. The impact on GDP would be equal to 1.1%, on employment – 1% and on tax revenue – 1.5%.

Head of Latvijas dzelzceļš Ugis Magonis admits the severity of this perspective and criticized Latvian Foreign Minister Edgars Rinkevics for ‘unreasonable policy’, including the sudden decisions to add several Russian citizens to the list of personae non gratae of Latvia and the agreement to join sanctions imposed by USA and the EU on Russia’s oil industry.

According to Magonis, LD plans to conclude 2014 with turnover of 45 million tons. The company plans to cease all of its sponsoring programmes in culture and sports.

Discounts to help attract Belarus

A memorandum has been signed with Belarus in regard to the increase of exports of oil products from Belarus through Latvian ports, as reported by Latvian Transport Ministry.

According to the document signed in Minsk, Belarus plans to increase exports of its oil products using Latvia’s railway infrastructure and Riga Freeport. Businessmen from Belarus will also take part in the development of the oil-handling terminal in Riga, as reported by the ministry.

In order to contribute to the development of long-term relations with neighbours, Latvijas dzelzceļš promises to maintain or even reduce transport costs in the next 3 to 5 years.

According to the former Transport Minister of Latvia Aivis Ronis, who led the talks in Minsk, this means several million tons of cargoes in possibly ten years. According to Ronis, it is planned to increase the volume of exports of other products from Belarus in the future.

Food product prices to reduce

Reduction of prices is caused by the decline of prices on oil and the largest global stores of grains in this century, believes Director of Agricultural Market Promotion Centre Inguna Gulbe.

‘If there are no changes to the geopolitical situation, climate and healthcare, prices may reduce even more in the beginning of next year. Prices have reduced quite significantly on the main production resources – fuel and grains. This means meat products and eggs can be produced even cheaper. If prices at which farmers sell their products reduce, so should the prices at which we buy these products,’ – said Gulbe during a press-conference.

At the same time the expert noted that the decline of prices on milk was caused by increase in supply, which came to be even before the adoption of the Russian embargo. The last factor only made the situation worse. Meanwhile, the domestic market shows a decline of consumption of dairy products. It is likely that milk procurement prices will continue to decline next year as well. The same applies to meat.

Nothing shows that global prices on grains could increase, believes Gulbe. Growth of harvests and decline of demand are two of the main deciding factors for the market: stores have reached their maximum capacity in the past fifteen years. As a result, he average grain procurement price in Latvia has declined by 18% in the past ten months.

According to farmers, price outlooks for food products are viewed as negative. The industry has tough times ahead of itself, adds Gulbe.


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