FM: Bad economic development in the EU slows down the development of export of goods in Latvia

The latest foreign trade data shows that in September 2024, the export value of Latvian goods reached 1,562 million euros, which was 7.7% higher compared to the previous month. A strong month-on-month increase in exports was recorded for almost all product groups, but the decisive role was played by the increase in grain exports, the value of which increased by 99.3% compared to August this year. However, annually, or compared to September 2023, exports of goods fell by 1.0%. Therefore, the value of exports of goods in the nine months of this year was 2.9% lower than in the corresponding period last year.

Evaluating the dynamics of goods exports, it must be concluded that the decline in goods exports will continue in the remaining months of this year. It is expected that the turn could be in February next year, when the year-on-year growth in the export of goods begins, mainly due to fundamental effects. However, even under such circumstances, the increase will be moderate and gradual.

External demand is improving but remains weak. According to Eurostat’s flash estimate, the gross domestic product (GDP) of the European Union (EU) increased by 0.9% in the third quarter of this year compared to the same quarter last year, which is slightly higher than the growth of the EU economy in the country in the second quarter, when GDP grew 0.8%. Such growth can be considered in a weak EU economy, so demand for Latvian products is not growing. In addition, Latvia’s important trading partners such as Estonia and Germany had fixed GDP declines, respectively 0.7% and 0.2% compared to the corresponding quarter of the previous year according to seasonally and calendar adjusted data. . On the other hand, the size of Sweden’s GDP remained unchanged in the third quarter of this year. Only Lithuania registered a noticeable GDP growth of 2.3%.

The latest EU economic confidence indicators do not show an increase in domestic and business activity, which could boost economic activity. EU economic confidence decreased slightly in October this year, both compared to the previous month and compared to the average level since the beginning of this year. Economic confidence in the main commodity markets – Estonia, Germany, Sweden, Finland – is hopeless. Evaluating the general economic mood in the EU regions, it must be concluded that the situation in the service sectors is stable. However, confidence in business and construction, which is most important to Latvian goods exporters, remains pessimistic in the EU, indicating that the decline in Latvian goods exports is likely to continue.

Making a more detailed assessment of the changes in the export of goods, it should be concluded that the decrease in the export of goods in September of this year was determined by several groups of products. The largest negative contribution to the overall decrease in goods exports was determined by the decrease in the export of electrical appliances and electrical equipment by 4.9%, which was mainly determined by the decrease in -trade mobile phone networks. The export value of machinery and mechanical equipment decreased by 0.3%. Exports of the above two product groups had the greatest impact on the decrease in re-exports.

The export of metals and their products decreased by 2.8%, which was confirmed by the decrease in the export of iron​​​​​​​​​​and steel, as well as their products. Likewise, a decrease in exports (in the amount of 2.3%) was recorded for mineral products, which were negatively affected by the decrease in natural gas and electricity exports.

The September data also shows positive trends. The value of grain exports increased by 43.4% during the year, and was positively affected by the increase in the export of wheat and a mixture of wheat and rye. Alcohol exports increased by 16.2%. Exports of wood and wood products increased by 9.0%, led by higher exports of round logs, sawn timber, and exports of wood and wood products with the highest added value such as plywood, chipboard and products another wood down.