Latvia’s exports on the rise in a time when the world is worried about trade wars
«Although the export year commenced with a high jump, it is not possible to hold such a high bar throughout the entire year. Growing external demand will help, considering stable economic growth in our partner countries,» predicts Swedbank economist Agnese Buceniece.
She says that January’s export results in Latvia provided a surprising 18.1% jump when compared to the same month of last year. The most significant contribution was provided by exports of turbo-jet and turbo propeller engines and other gas turbines goods exports to USA.
«If we take this effect, which is likely an exception (similar volumes were noticed in September last year), out of the equation, export growth becomes 13%. But even that is rapid growth. It is important to note that it does not depend on a specific group of export goods. Growth was observed in nearly all of the largest export groups – metals and their products, mechanisms and equipment, food and beverages, as well as wood and its products,» says Buceniece.
The economist predicts that growth rate will slowly start declining. Then demand for Latvian goods will grow more slowly. «It is also becoming harder for exporters to increase production volumes, because at the current investment level the economy will focus more on restriction of production output and labour force availability. Because of that, we expect export growth to be slightly slower than it was last year,» Buceniece says.
She notes that following the announcement from USA about application of tariffs on steel and aluminum imports in the world the tidings of protectionism have once again appeared, threatening global trade volumes. «Because Latvia has a small open economy (exports form approximately 60% of GDP), this risk would negatively affect our exporters and economic growth. It is currently unclear how other countries will respond to the announcement from USA and what the effect could be on the world’s and Latvia’s external trade,» comments Buceniece.