OREANDA-NEWS. March 12, 2013. Latvia’s businesspeople are, in general terms, optimistic, and that has been true now for four quarters in a row, but the fact is that there are substantial differences between companies that do and companies that do not export goods or services.

This is the finding of the latest Citadele Index study, as conducted by the Citadele Bank in partnership with the SKDS market and public opinion research centre. Experts say that exporters and non-exporters live in pretty much separate worlds today, and for that reason, they recommend that those companies which are not exporting anything at this time start thinking actively about opportunities to do so.

The level of the Citadele Index in the fourth quarter of 2012 was 51.96 points, which was 1.05 less than the level of 53.02 points in September 2012. This is a comparatively negligible decline. When the level of the index is above 50, that shows that businesspeople are more optimistic than not, while the opposite is true when the level is below 40.

The situation among exporting and non-exporting companies is very different, indeed. Managers of exporting companies are much more optimistic, with an index of 55.52 points in December 2012 – up by 0.46 points since September. Managers at non-exporting firms posted a result of 50.90 points, which was down by 1.32 points against the previous indicator.

Exporters Rejoicing

“Managers at exporting companies are, in some cases, extremely optimistic, while something of a crisis can be seen among non-exporting enterprises,” says SKDS director Arnis Kaktins. “The index among non-exporting companies is basically on the boundary between optimism and pessimism, and there are some areas in which it has already sunk below 50 points – corporate profitability (49.06), the company’s financial condition (49.51), the number of employees at the company (49.53) – these non-exporting companies are far more cautious about their approach.”

The difference in moods between exporters and non-exporters is also seen very well in the present and future index. The present index improved among exporting companies to 55.38 points (54.53 in September), while the index for non-exporting companies sank from 52.57 points in September to 50.04 points this time. The future index for exporting companies was at a level of 55.66 points (up very slightly from 55.59 points in September), while among non-exporting companies, there was another drop – from 51.87 points to 51.76 points.

The overall value of the present index, which represents the views of businesspeople about the six months that started in September 2012, is down from 53.12 points back then to 51.27 points in December. The future index, which relates to the next six months, has remained at a similar level – 52.66 points in December.

Looking Beyond Borders

“Three years ago, the Latvian Chamber of Commerce and Industry (LTRK) and the Citadele Bank organised an Export Day event, and the slogan was ‘Export or Die!’,” recalls LTRK board chairman Janis Endzins. “This study and real life prove that claim, because exports are really setting the tone for sustainability and development of companies. In 2012, the LTRK organised more than 100 seminars for its members on the broadest variety of subjects. We saw that the most attention was focused on seminars, which had to do with exports and sales. It is not just large companies, which are exporting products and looking for new markets at this time. Small companies are doing the same, and increasing numbers of them have come to the LTRK to find help in ways of launching exports.”

“The world is split up into zones of growth at radically different speeds,” says Citadele’s chief economist, Zigurds Vaikulis. “While the European Union is mired in a recession, the United States and Asia are continuing to grow at a comparatively healthy place. Statistics show that similar processes have also been seen during the last several quarters in certain sectors in Latvia.”

“When it comes to processing industries in Latvia, extreme growth has been seen in metals manufacturing, while growth in other major subsectors has been much more moderate,” Vaikulis continues. “Overall retail sales growth remains comparatively high thanks to rapidly increasing spending on computers and telephones. This, by the way, might have to do with an increased offer of loans. When it comes to exports, a major contribution during the latter half of 2012 came from the grain sector, which grew by several hundred percent thanks to a combination of high prices and good harvests.”

Experts say that exporting companies which have struck a balance between product quality and price are not harmed or are only slightly harmed by larger or smaller economic crises. For that reason, Latvian companies must focus more on exports and a key to sustainability.