EBRD says Latvia among hardest hit by Russia sanctions

A new report published Tuesday by the European Bank for Reconstruction and Development (EBRD) confirms what many Latvian farmers, fishermen and food producers already know only too well - that the country will be among those hardest hit by the sanctions war between the Euoprean Union and Russia. 

"The overall negative impact of the food ban may be limited and temporary for most of the sanctioned countries. But it may have a noticeable effect on exports and GDP in the three Baltic states, Norway, Poland and Hungary, as their food exports to Russia make a substantial contribution to their GDP, and may even cause a temporary reduction in prices of affected foodstuffs," the EBRD said in its report.

EBRD figures showed that Latvia is the third-placed country in terms of how much it exports per capita to Russia, behind neighbors Lithuania and Estonia.

Latvian food exports account for 0.34% of total GDP, against 2.72% for Lithuania and 0.36% for Estonia.

However, the impact on Latvia may be greater than such figures would suggest as items such as milk are often supplied to Lithuanian producers for re-export to Russia.

"Some analysts claim that food exports from Lithuania to Russia may consist of a substantial share of re-exports (up to 80 per cent) from other Western economies, although a large portion of these imports may still come from other affected CSEE countries, including Latvia and Estonia," said the EBRD.

"To the extent re-exports rather than domestic production will suffer, the effect on Lithuanian GDP will be less than 2.7 per cent, with agricultural sector less affected, but firms servicing exports to Russia, e.g. transport sector firms, more affected. Nevertheless, the effect on Latvia and Estonia may thus be somewhat larger."

In countries such as Latvia the ban may lead to a temporary oversupply of affected goods, creating downward pressure on prices and inflation, the EBRD said.

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