A second report on foreign trade by the Central Statistical Bureau shows that in H1/13 exports increased by 7.5% y/y to LVL 3.37bn (EUR 5.37bn) at constant prices, while imports remained almost flat inching by 0.1% y/y to LVL 4.17bn. The share of exports in the foreign trade in H1 increased to 44.7% vs. 43% a year ago.

Exports and imports dynamics in H1 resulted in a foreign trade deficit of LVL 0.8bn (EUR 1.13bn), which is 22.5% lower y/y.  As reported previously, trade deficit in June 2013 decreased by 45% y/y to LVL 107mn (EUR 152.4mn). Exports’ growth in June increased in y/y terms by 1.8% y/y (5% y/y in March and April, 0.1% in May), while imports’ decline intensified further to y/y 10% y/y. In m/m terms exports declined by 2.5% m/m and imports remained flat m/m.

Foreign trade deficit in 2012 increased by 4.7% y/y to LVL 1.8bn (EUR 2.56bn), with growth rate of the deficit steadily declining throughout 2012 from 38% y/y seen in H1/12 and 13.5% y/y in Jan-Sep 2012. Exports growth picked up from 10.5% y/y seen in H1/12 to 15% y/y in 2012 overall. Exports outpaced imports growth of 12.7% y/y. Exports and imports reached LVL 6.9bnand LVL 8.7bn, in 2012, respectively. To compare, in 2011 exports and imports growth stood at 28% y/y, with exports growth slowing down from over 40% y/y seen in the beginning of 2011.

The Bank of Latvia economist Daina Pelece commented previously that in June exports’ growth y/y would amount to 7.7% y/y if unaccounted for a drop in exports of base metals due to troubled metals major Liepajas Metalurgs. However, slowdown of exports is still broad-based as the growth rates declined in almost all major segments and trading partners in June. Good exports of cereals and grain due to favourable harvest was noted.

At the same time the CB believes that consumer and producer confidence indicators improving in Europe for the past three months will translate into stable export volumes. However, in the long-term investment is required to expand capacity and improve competitiveness.