Latvia’s current payment account deficit in the first nine months of 2023 was EUR 1.441 billion, which is equal to 4.8% of GDP, according to information published by the Bank of Latvia.
In Q3 current payment account deficit as EUR 558 million, which is 5.3% of GDP.
Bank of Latvia economist Matīss Mirošņikovs says the European national economy is slowing down – the real estate and construction sectors have stopped in their tracks because of the high interest rates. Consumption is down as well. This means weaker external demand for Latvian exporters, as well as lower prices for various goods important for Latvian exports.
“Although prices have stabilised after a lasting drop, the development of important trade partners does not inspire optimism at the moment,” said Mirošņikovs.
He mentioned that the drop of export goods’ value, when compared to last year, is considerable. However, it’s important to keep in mind that last year there was also a considerable increase of export value. This means the current situation is considered closer to the norm, not the situation in 2022. Prices are now significantly lower for various important export groups, such as cereals, which also had lower than last year’s record harvest, and also timber, for which there has been a drop in demand in important trading partners, such as Scandinavia.
Exports of various goods, such as alcohol and textile goods went up this year.
The value of imports of goods went down slightly more slowly than exports. Nevertheless, the drop over the course of the year was greater than 20%. This drop was mostly observed for mineral products – petrol products, natural gas, electricity, whose imports were three times below last year’s numbers.
At the same time, Mirošņikovs mentioned it is important to keep in mind that a year ago uncertainty was much larger and prices were record-high. Although less rapidly, value went down for imports of other goods – wood imports down by a quarter, imports of plastic products down by a fifth. Imports of vehicles and food products were more sustainable.
Foreign tourism contributed slightly to the sale of services. This year’s tourism season in Latvia was more successful than the year prior. Thus, air transport also did better this year, as opposed to more goods-related road transport, whose performance in the third quarter was weaker than in the first half of this year.
Recently, the value of telecommunication, computer and other economic services that determine the growth of service exports was similar to last year. Which points to a slowdown in growth in modern services, not only traditional ones.
Similar trends are observed in the service import sector, making turnover of the trade of service comparable to a year prior, says Bank of Latvia economist.
He also said that the influx of direct foreign investments in Q3 reached 4.6% of Latvia’s GDP. The main influx took place in professional, scientific and technical services, financial activities, trade and manufacturing sectors.
“With Russian investments out, investments from other countries exceed lost investment volumes, which indicates that Latvia has not lost attractiveness in the eyes of foreign investors in such a difficult time,” said Mirošņikovs.
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