OREANDA-NEWS. July 14, 2009. The May data didn’t denote on the new tendencies in the foreign trade:  due to the weak inner and external consumption, export and import flows continued to diminish. In the result, when comparing with the previous May, export has diminished by 30.1%, while import – by 43.7%, reported the press-centre of Latvijas Krajbanka.

Although during last two months the slowdown signs of global economic recession can be observed, this year the decline of the world’s gross product will be much tougher than it was projected in the beginning of the year. It is no surprise that under such conditions the export flows from Latvia have diminished by one third during a year. All the main exporting branches of Latvia were seriously affected, including export of timber and timber articles, the decline of which comprised 34%, export of base metals and base metal articles - by 55% (in comparison with May 2008).

Small decline was observed in the export of chemical industry, which is mainly ensured by a significant increase of the pharmaceutical product export by 38% during a year-time. There is no doubt that the crisis has affected all Latvian branches, nevertheless the pharmacy branch indices are comparatively better. The retail trade turnover of pharmaceutical goods shows much less decline than it was observed in other groups. In its turn export increase denotes on the increase of the pharmaceutical product sales amounts on the foreign markets, even despite national currency devaluation in the CIS countries and rise of lat value towards currencies of several other sales markets, which makes the products produced in Latvia relatively more expensive.

It is obvious that position recovery on the export markets will be the first factor furthering recovery process in Latvia. Nevertheless, the increase possibilities of Latvian export flows in the nearest time should be evaluated with certain prudence. A certain time should pass until the consumption in Europe and in CIS countries will show increase and will really affect Latvian export indices. Also we shouldn’t forget that the scale of the world’s recession is impressive, and it is projected that the economic recovery processes in Europe will happen quite slowly.

Although predictable, but still shocking import data denote on the dramatic situation in Latvian economy, the decline of income, rise of unemployment, uncertainty about further development in the state economy and in the government decisions deepen decline of consumption in Latvia, in the result of which the import flow during the last year has diminished by almost two times. 

If recently the consumption boom furthered growing import dominance over export, then this year the negative trade balance is diminishing with lightning speed, in May reaching only 84 million lats in comparison with 240 million lats last year. No doubt that balancing of the trade balance will last, most likely reaching zero next year (i.e. the import flows will not predominate over the export amounts any more). Nevertheless it is also possible that the decline of Latvian economy will not increase over the second half of the year, and under such conditions the balanced trade balance could be observed even by the end of this year.