The sharp rise in the prices of natural resources in the world this year has also contributed to the growth of Latvia’s exports, and in September this year Latvia’s exports of goods have reached a new record. According to the information published by the Central Statistical Bureau, for the first time in September this year, Latvia’s exports of goods exceeded 1.6 billion euros in one month, and compared to September last year, our exports have increased by 23.2%.
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Latvia’s exports are growing at the same rate as world trade this year, and the trends in Latvia’s exports in recent months are a good reflection of developments in the industry. Physical exports of goods are growing, but price factors are dominating and the strong rise in exports is currently largely at the expense of rising resource prices. However, prices are rising for both exports and imports, and in September imports of Latvian goods increased by 24.6%.
The rise in electricity prices alone cost Latvia almost 70 million euros in August and September, and Latvia’s foreign trade balance has deteriorated significantly this year due to rising imports.
In September, as in previous months, the fastest growth in exports was recorded in sectors and product groups where world prices have risen. Compared to the previous year, exports of wood products increased by 84.3% in September, iron and steel – by 91.2%, and iron products – by 27.6%.
In addition, cereal exports increased by 2.4% in September, with a slightly lower grain harvest this year helped offset by higher prices. Exports of oil and other energy resources also increased 2.2 times in September, but this is mainly due to re-exports, and imports of these products increased just as sharply in September.
There is currently a very strong global demand for a variety of goods, which is contributing to both rising raw material and transport prices and congestion in global logistics. Therefore, the growth of Latvia’s exports of goods will continue in the remaining months of this year, and this year, in general, the growth of exports is likely to exceed 20%.
However, forecasts for 2022 are very difficult. The strong demand for goods is currently at least partly due to the still limited performance of the services sector and the low level of inventories in many sectors. The recovery will continue at least until next spring, but different scenarios are possible.
Normalization of demand, rising consumer prices, and less warming of the economy by national as well as central banks are likely to mean lower or slower growth in demand for goods. In my opinion, it is not ruled out that in some areas the market may saturate rapidly over the next year and that a surplus will be created instead of a goods deficit.
Fluctuations in resource prices are also very atypical this year. For example, timber prices in the United States, natural gas prices in Europe and iron ore prices in China have risen sharply and fallen unexpectedly this year. The same can happen with our export goods, such as wood products, so it cannot be ruled out that Latvia’s exports in euro terms may also decrease next year.
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