In November the value of goods exports increased by more than 30 percent, reaching EUR one billion and 635 million. On the other hand, the export of services is not as successful, and this year, experts no longer promise such records for goods.
The value of exports last November was the largest since the external trade data are compiled, according to Aleksejs Jurša, an expert at the Macroeconomics Division of the Ministry of Finance. This situation shows the sustainable competitiveness of Latvian goods exports, influenced by a number of factors, firstly, the capacity of the manufacturing industry.
“The second factor is the recovery of the world economy from the pandemic. Although there are still weaker restrictions in Latvia and in other countries, the global economy is still recovering faster than expected by the International Monetary Fund or the European Commission. So it creates additional demand. Another factor that, on the one hand, has a positive impact but also a risk that could have a negative impact on the future, is the increase in commodity prices. This could limit the potential of processing companies to work at a certain capacity,” explained Aleksejs Jurša.
Labor shortage is currently the risk felt by many industries, according to the representative of Latvia's largest export sector – the timber industry – Artūrs Bukonts, executive director of the Latvian Association of Wood Processing Entrepreneurs and Exporters.
He forecast moderate growth this year. “Hopefully there will be no big shakeups in either direction. But what could hinder growth is precisely a labor-constraining factor, a labor shortage," he said.
The export figures achieved at the end of the year will not continue. Luminor Bank economist Pēteris Strautiņš said: “More than half of the increase is at the expense of prices. Producer prices in exports grew by about 20% in the second half of last year. But that doesn't mean there would be a crisis in the export sectors. In real terms, export growth is likely to continue. But there are potential falls in numerical or nominal terms.”
Strautiņš said that timber prices were particularly high.
But exports aren't just commodities. Services, particularly tourism, experienced a complete shutdown. “For those who did well, they will continue to do well [in 2022]. Tourism probably can't get worse anymore. I would expect a very good rise in tourism services this year,” said Strautiņš.
The Ministry of Finance also forecasts that despite the difficult situation with the spread of the virus, it is expected that Latvian goods exports will continue to grow in the coming months.