LATVIA – EXPORT (11/2022)
According to the latest data from the Central Statistical Office, in September 2022 the export of goods continued to grow rapidly. For the first time since the beginning of foreign trade statistics, merchandise exports exceeded EUR 2 billion.
The total value of exports in September this year amounted to 2,137 million Euros, an increase of 32.3% compared to September last year. The trend of rapid growth of merchandise exports of the previous months has thus continued. In the first nine months of 2022, the value of merchandise exports increased by 31.9% year-on-year at the expense of all groups of merchandise exports, except for the group of metal products.
As in previous months, one of the main reasons for such a rapid increase in merchandise exports was the rise in prices. Data for September is not yet available, but data for August shows that the unit value index for exports increased by 21.3% during the year.
Applying the increase in export prices recorded in August to September’s data on merchandise exports, in real terms (i.e. excluding the impact of prices), merchandise exports increased by 11.0% in September. For the first nine months, however, real export growth was 9.5%.
Prices have risen for almost all raw materials, namely energy, food, metals and timber, and this has had an impact on end-product prices as logistics and production costs have risen significantly. The high level of raw material prices will continue at least until the end of this year and will persist into the beginning of next year as well.
Thus, in nominal terms, the value of commodity exports will increase in the coming months as well, but the increase will gradually slow down, affected by the fall in demand on foreign markets. At the same time, it is important to note that even if we exclude the price effect, an increase in exports of goods by about 10% in comparable prices is considered a very good indicator.
An increase in the value of exports of goods was recorded in September this year for all commodity groups, except for metal and metal products. Two groups of goods can be noted, which provided the largest contribution to the growth of exports, or more than two thirds.
The first group is the export of agricultural and food products, the value of which increased by 57%, or 206 million EUR, compared to September last year. Half of this rapid growth was due to an increase in grain exports. Traditionally, it is the autumn months when higher volumes of grain exports are recorded, which is due to the end of the harvesting season of the crop.
According to farmers’ estimates, this year’s grain harvest is considered good; therefore, grain exports are also expected to contribute to total merchandise exports in the coming months. Among other groups of agricultural and food products, an increase in exports of dairy products, vegetables and alcoholic beverages can also be noted.
On the other hand, the second group of commodities contributing significantly to export growth are mineral products. With a significant increase in exports of electricity, as well as re-exports of refined products and natural gas, exports of mineral products more than tripled, or by EUR 192 million. Changes in the value of exports in other product groups are shown in the graph.
High energy prices and a worsening geopolitical situation are having a negative impact on citizens’ purchasing power and investor activity, both in Europe and elsewhere in the world. International organisations’ forecasts for economic development this year have been revised downwards. The economic outlook for next year has also been downgraded.
On the other hand, the most recent business and household confidence data confirmed fears of an economic slowdown. The European Union (EU) economic sentiment indicator has been declining since last November, but in July this year the value of the indicator dropped below 100 points. The decline continued in the following months, with the indicator already reaching a value of 90 points in October.
The fact that assessment of economic activity by businessmen and consumers is worsening in practically all EU member states, as well as in all spheres, including industry and construction, which are more important for Latvian exporters, can be assessed negatively. The growth of merchandise exports is expected to continue in the coming months, but the growth rate is likely to be significantly lower at the end of this year and at the beginning of 2023 compared to the current levels.