Latvia’s current account deficit in the balance of payments reached 1.098 billion euros in the first nine months of this year, equal to 3.6% of GDP, according to data published by the Bank of Latvia. In the third quarter alone, the current account deficit totalled 348 million euros, or 3.1% of GDP.
The Bank of Latvia notes that external trade dynamics in the third quarter were significantly influenced by seasonality, as well as persistent uncertainty in several export markets. Latvia’s exports grew more strongly to European Union (EU) markets, but weak economic growth in certain trading partner countries continued to limit external demand.
Goods exports increased in the third quarter, reflecting the usual seasonal pattern; however, once adjusted for seasonal and calendar effects, a slight decline was observed compared to the previous quarter. Export performance was negatively affected by short-term fluctuations in the mineral fuels segment following earlier growth. Declines were also recorded in exports of iron and steel, as well as animal and plant products, with more pronounced volatility in these categories since 2022.
The Bank of Latvia highlights a significant drop in exports to the United States, marking one of the sharpest declines in the past decade. The most affected categories were major wood product groups — such as sawn timber — and mechanical equipment. The fall in wood exports to the U.S. began in the second quarter of this year and was linked not only to the U.S. market but also to several of Latvia’s traditional wood export destinations, primarily due to weakening global demand. The export decline observed in the third quarter likely reflects the effect of newly introduced import tariffs that have already taken effect.
At the same time, the Bank of Latvia emphasises that overall wood exports increased in the third quarter of 2025, and
the share of U.S.-bound exports remains relatively small.
Therefore, these changes will not significantly affect the overall development of the sector.
A stronger rise in wood exports was held back by decreased demand from Northern Europe — particularly Sweden, where the construction sector continues to recover slowly. By contrast, exports to Germany increased, despite continued weak economic activity there. Export dynamics were also supported by rising firewood demand in the United Kingdom and higher cereal exports, especially to Spain, which this year replaced several previous export destinations in Africa.
Adjusted for seasonal and calendar effects, imports declined during the quarter, mainly due to lower imports of fertilisers and transport vehicles.
As a result, the trade balance improved compared to the previous quarter, as the decline in exports was smaller than the drop in imports. However, the balance deteriorated year-on-year, the Bank of Latvia notes.
The Bank also reports that imports from the U.S. more than doubled,
driven mainly by increased imports of ammunition and mineral products. It remains unclear whether this rise was shaped by the EU-U.S. agreement under which the EU will purchase €700 billion worth of energy resources from the U.S. over the next three years, or was due to contracts concluded before the announcement of new tariffs.
As usual, the third quarter showed strong performance in travel exports, boosted this year by the hosting of the EuroBasket 2025 tournament in Latvia, which increased inbound tourism. Rising inbound tourism also contributed to higher air transport services, and road transport service exports continued their positive trend. As in previous quarters, exports of professional, technical, and other business services also continued to grow.
On the import side, the tourism season similarly increased imports of travel and air transport services. Imports of professional, and especially technical and other business services, also continued to grow. Technical services saw the fastest increase in the energy and administrative sectors, particularly in tourism operator activities related to the season, as well as in vehicle leasing brokerage services. Ongoing major construction projects also contributed to rising construction imports, particularly in electricity supply and telecommunications engineering.
Foreign direct investment (FDI) in Latvia reached €320 million in the third quarter of 2025, equivalent to 2.9% of GDP. Investments were mainly directed into professional, scientific and technical services, financial and insurance activities, as well as the energy sector. The largest investors, as usual, were from Sweden and Estonia.
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