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Tuesday, February 26, 2008

Latvia External Trade December 2007

According to the latest data from Latvijas Statistika:

Compared to November 2007, the value of exports in current prices in December 2007 decreased by 10.8% or 39.8 mln lats, but in comparison with December 2006 it increased by 12.9 % or 37.4 mln lats, reaching 328.0 mln lats, according to Central Statistical Bureau data.

However, the value of imports in current prices in December 2007 was 8.4% or 54.3 mln lats lower compared to November 2007, but in comparison with December 2006 the decrease comprised 6.2% or 39.5 mln lats, reaching 593.0 mln lats.

The total foreign trade turnover in December 2007 was 0.2% or 2.1 mln lats lower than in the corresponding period of the previous year and its value was as high as 921.0 mln lats.

The value of exports in current prices in 2007 reached 4025.2 mln lats – more by 732.0 lats or 22.2% compared to 2006.However, the value of imports in current prices in 2007 was more by 1342.5 lats or 21.0% compared to 2006 and reached 7721.0 mln lats.

So while year on year exports were still up by 12.9% year on year, they were DOWN by 10.8% on November, and indeed exports in November were down on those in October. And although the trade deficit reduced slightly, this is not the result of exports powering ahead to drive growth.

In fact the reduction in the trade deficit is basically a result of the fact that imports were falling even faster than exports, and indeed the year on year rate for imports is now negative. Which is a reflection I feel of the way in which internal demand in Latvia is now contracting rapidly. But if internal demand is contracting, and exports start to fall, then, if the governemnt go for a fiscal surplus, we should expect Latvian GDP to start to contract at some point, shouldn't we?

What we should note about the above chart is the slope of the imports chart. We should be getting used to seeing this in internal demand charts for the Baltic economies at the moment. We may also not that while year on year the rate of export growth was positive, the rate of increase is slowing by the month. One reason, apart from the slowdown in Germany, that this shouldn't surprise us is the degree of trade interlocking among the Baltic states. Latvia's two most important export destinations - and by quite a long way - are Estonia and Lithuania, and if internal demand is about to subside in these two countries, then so are Latvian exports.

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