Russia’s aggression in Ukraine and the resulting economic consequences, i.e. damaged supply chains, as well as the deficit of certain raw materials, have not yet been fully reflected in the foreign trade data of Latvian goods, however, at the end of this year and the beginning of next year, the development of foreign trade of Latvian goods will slow down, FM predicts.
The renewed economic forecasts of international institutions also indicate that external demand will slow down. If in January of this year, the International Monetary Fund (IMF) predicted that the world economy could increase by 4.4% in 2022, then due to the deterioration of the geopolitical situation, in July of this year, the IMF, updating its economic forecasts, once again reduced the global economic growth forecast for 2022 up to 3.2%. Next year’s economic growth was also revised downwards, cutting global GDP growth to 2.9%. The revision of economic forecasts is largely due to the Russian invasion of Ukraine and its consequences.
According to the latest data of the Central Statistics Office, in June of this year, the rapid increase in the export of goods continued. The value of goods exports amounted to 1.65 billion euros, which was 28.6% higher than in July last year. Thus, the trend of the rapid increase in the export of goods of the previous months was maintained. In the first half of 2022, the value of export of goods increased by 31.8% compared to the corresponding period of the previous year, which was contributed by all major export groups of goods.
One of the main reasons for such a rapid and sustained growth of export of goods was the rise in prices, FM representatives explain. Data for June are not yet available, but data for May show that the export unit value index increased by 25.3% during the year. Applying the increase in export prices recorded in May to the June goods export data, in real terms (ie excluding the effect of prices) the export of goods increased by only 3.3% in June. However, in the first six months, the real growth of exports was 8.4%.
FM representatives indicate that price increases are observed for practically all raw materials, namely energy resources, food, metals, wood, thus affecting the prices of final goods, as logistics and production costs have significantly increased. A high level of raw material prices will remain at least until the end of this year, so in nominal terms, the value of goods exports will increase in the following months as well, but the increase will gradually slow down.
The increase in the export value of goods was recorded in June of this year for most groups of goods. However, the largest contribution to export growth was provided by the export of the agricultural and food group, with a significant increase in the export of cereals, dairy products, and alcoholic beverages. Exports were also boosted by the group of mineral products, with an increase in the re-export of petroleum products and the export of electricity. In addition, the export of goods was ensured by a higher export value of machinery and electrical equipment.
In June of this year, the export of wood and wood products decreased for the first time since the beginning of 2021, FM representatives emphasize. Annually, the decline is 4.3%, but compared to the previous month, the value of wood and wood exports decreased by 26.5%. Until now, it was this group of goods exports that provided the largest contribution to the overall growth of goods exports. The negative thing is that the decline was recorded for a wide range of goods, namely in chipboards, firewood, wood pellets, lumber sawn to length. The increase was recorded only for raw timber and plywood.
In terms of the outlet market, the FM concludes that the situation is not clear-cut, as the drop in exports has been fixed to Great Britain, the USA and Denmark. At the same time, the export of wood and wood to Estonia, Lithuania, the Netherlands and Italy increased. However, the export of wood to Great Britain, which is the largest market for this group of goods, significantly decreased – by 41.1% in total. Despite the reduction, Great Britain remains the largest market for Latvian wood.
It has already been reported that in the first half of this year Latvia exported goods worth 9.62 billion euros, which is 31.8% or 2.32 billion euros more than in the corresponding period of 2021, but imported – for 12.14 billion euros, which is an increase of 38.7% or 3.39 billion euros, according to data from the Central Statistical Office (CSB).
Thus, in the first half of the year, Latvia’s foreign trade turnover in actual prices reached 21.77 billion euros – by 5.71 billion euros or 35.5% more than in the corresponding period of 2021.
In June 2022, Latvia’s foreign trade turnover amounted to 3.68 billion euros, which in actual prices was 23.7% more than a year ago, including the value of exports of goods increased by 28.6%, and the value of imports by 20%, according to CSB preliminary data.
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