In Q3, the current account formed a surplus of 1.5% of the country’s GDP, according to the data from the Bank of Latvia. This year’s general surplus is 1.1% of GDP. It is expected that investment inflow will remain positive. It will be slower than last year, predicts Swedbank economist Agnese Buceniece.
Contribution to the current account in Q3 was set by trade balance (goods and services together), which became positive again after a dip in the first half-year (1.5% of GDP). This was largely secured by more rapid import decline (-4.2%). Balance of goods remains negative, but it does keep improving. Although exports of goods continue to decline, the value of exported goods has begun to improve. Latvian exporters continue increasing their volumes. Service balance remains positive. The -6.9% decline in exports of transport services continues to slow down growth of export services (+2.9%).
Trade balance continues to improve thanks to the decline of the negative effect from export volume growth and price decline. This is why there may be surplus on the current account this year, the economist predicts.
“We noticed in the first half-year that direct investments were flowing from Latvia. Nevertheless, it may be only a temporary phenomenon. In Q3, EUR 260 million entered Latvia in the form of direct investments, compensating the first half-year’s decline. It should be mentioned, however, that it is 16% below last year’s result. We expect investment inflow to be positive but slower than it was a year ago. We will only be able to increase the inflow of investments once we complete our homework – structural reforms”, the economist said. (BNN/Business World Magazine)
