The Latvian Economy - December 8, 2011
Goods exports' growth will continue to slow but so will that of imports
- Export growth has been the main driver of the Latvian economic recovery in 2010-2011. Goods exports contributed the most – in September 2011, nominal goods exports were already 30% higher than in September 2008 – the peak before the global recession. However, future export growth depends on developments in Europe and thus is likely to be hampered by the euro zone’s problems.
- Import growth is still mostly driven by the needs of exporting sectors, both for capital and intermediate goods. Import developments have been following exports quite closely. With export growth slowing, that of imports will decelerate as well. Thus, while trade deficits are expected to increase very slowly in the coming years, they should pose no threat to the sustainability of current account deficit financing.
- The global economic slowdown can be partly counteracted by continuing to strengthen the competitiveness of Latvian exporters and to use the advantages of a small and flexible economy, for which it is easier to increase export market shares. In addition, opportunities for exporting to stronger-growing emerging markets should not be missed. At the same time, it should be borne in mind that competition will be tough.