lv

Press Release of September 30, 2003

In the second quarter of 2003, the current account deficit of the balance of payments was 150.4 million lats or 10.6% of GDP (107.3 million lats or 8.4% of GDP in the second quarter of 2002). In the terms of GDP, the current account deficit for the first half of the year was 8.2%. The growth of the current account deficit was mainly caused by a rise in the goods and income deficit and a fall in the services surplus against the same period of the previous year. Notably grew the current transfers surplus. Exports of goods increased by 15.2% despite the still sluggish economic growth in Europe. Growing imports of capital goods and intermediate goods (by 19.9%) determined an increase in imports of goods (18.5%). Deficit of goods amounted to 19.0% of GDP. Surplus of services and current transfers covered 56.6% of the goods deficit.

 

Exports of goods to the EU countries grew particularly swiftly (28.5% year-on-year). The largest growth was registered in exports to the United Kingdom, Sweden and Germany. Growth in exports to the CIS countries and other countries was just moderate.

 Regarding Latvia's exports of goods, wood and articles of wood, base metals and articles of base metals, and textiles and textile articles dominated (38.4%, 12.6% and 11.5% of total exports, respectively). The largest year-on-year rise was achieved in exports of wood and articles of wood (mainly sawn wood). Similarly, the increase in exports of base metals and articles of base metals, machinery and mechanical appliances, electrical equipment, and textiles and textile articles was also sizable.

 The most important import goods were machinery and mechanical appliances, electrical equipment (19.5% of total imports), transport vehicles (11.1%), output of the chemical and allied industries (10.5%), base metals and articles of base metals (9.5%) and mineral products (8.9%). Imports of all commodity groups showed an upward year-on-year trend, of which the largest increase was registered for base metals and articles of base metals, machinery and mechanical appliances, electrical equipment and transport vehicles.

 The services surplus (6.1% of GDP) declined by 8.8 million lats year-on-year, such a decline being mainly caused by a drop in other services surplus. Though the situation in oil transit was unfavorable, the transport services surplus increased by 2.8 million lats year-on-year. Transport services rendered by rail and road reported the largest increase. The travel services deficit went up (an addition of 3.4 million lats) due to larger spending of residents abroad than of foreign visitors in Latvia. The surplus of other services dropped 8.2 million lats, as other services received from non-residents grew at a more rapid pace. Regarding other services rendered to non-residents, a drop in trade intermediation and other trade-related services (7.8 million lats) determined their overall lower growth rate.

 The rise in non-residents' income from direct investment in Latvia determined a larger (by 11.9 million lats year-on-year) income deficit.

 The current transfers surplus reached the highest level over recent years. The rise in the current transfers surplus (30.9 million lats year-on-year) emerged mainly due to a pick-up in transfers received by other sector (including private persons).

 The surplus of the capital and financial account was at the level of 108.4 million lats (of which 54.9% was foreign direct investment).

 The direct investment inflow amounted to 59.5 million lats or 4.2% of GDP and covered 39.6% of the current account deficit. In the first six months, direct investment inflow was 122.0 million lats or 4.5% of GDP and covered 55.0% of the current account deficit.

 Portfolio investment balance was negative (net outflow of 19.0 million lats). Residents (predominantly banks) by 32.9 million lats pushed up their investment in portfolio investment assets (mainly debt securities) but non-residents enlarged their investment in equity securities in Latvia's enterprises and government debt securities by 14.0 million lats.

 Inflow of other investment reached 131.1 million lats. On the liabilities side, other investment of residents grew by 227.3 million lats as mainly banks received loans (time deposits) and demand deposits, while on the assets side, residents' other investment increased by 96.2 million lats.

 With the demand for lats growing and the Bank of Latvia engaging in currency swap transactions, reserve assets grew 73.3 million lats in the second quarter.

LATVIA'S BALANCE OF PAYMENTS
(in thousands of lats)

 

2002

2003

 

I

II

III

IV 1

I 1

II

CURRENT ACCOUNT

-35948

-107277

-109634

-143225

-71256

-150439

GOODS

-170130

-215409

-219908

-282989

-224866

-268678

Credit (exports)

348183

403748

418077

418224

403988

465173

Debit (imports)

-518313

-619157

-637985

-701213

-628854

-733851

Services

95335

95547

71170

75348

95443

86730

Credit (exports)

185148

204199

197615

186369

203411

221677

Debit (imports)

-89813

-108652

-126445

-111022

-107968

-134948

Income

6536

-21800

-11562

22039

4141

-33730

Credit

43219

42367

42529

49945

48971

49794

Debit

-36682

-64167

-54091

-27906

-44830

-83524

Current transfers

32311

34386

50666

42378

54027

65240

Credit

64510

71187

95173

99517

96211

117333

Debit

-32199

-36800

-44507

-57139

-42184

-52093

 

 

 

 

 

 

 

CAPITAL ACCOUNT

3676

2492

2221

2602

1270

5619

Credit

4382

3412

3878

3527

1951

6305

Debit

-706

-920

-1657

-926

-681

-686

 

 

 

 

 

 

 

FINANCIAL ACCOUNT

45723

91868

126560

156171

57306

102752

Direct investment

68689

81242

60849

21605

62435

59520

Abroad

359

-2821

364

-2837

-4072

-1642

In Latvia

68331

84063

60486

24442

66508

61162

Portfolio investment

-30708

-64387

-19968

-28769

-38409

-18973

Assets (investment in foreign securities)

-30457

-64446

-14500

-28470

-41799

-32936

Equity securities

-13136

879

1061

9470

375

-678

Debt securities

-17321

-65325

-15561

-37940

-42174

-32258

Bonds and notes

-26602

-75851

-25953

-38039

-41647

-26264

Money market instruments

9282

10527

10392

99

-527

-5994

Liabilities (foreign investment in Latvian securities)

-251

59

-5468

-299

3390

13963

Equity securities

20451

8129

-13745

-54

641

6808

Debt securities

-20702

-8070

8278

-245

2749

7156

Bonds and bills

-19937

-8037

8278

-246

2739

7251

Money market instruments

-766

-33

0

1

10

-95

Financial derivatives

-447

5017

2065

1346

-5090

4429

Assets

-2607

-6559

6739

-2122

-1946

-2153

Monetary authorities

799

-4689

4372

-2207

-1908

135

General government

0

0

0

0

0

0

Banks

-2767

-1870

2367

93

-463

-2348

Other sectors

-639

0

0

-8

425

61

Liabilities

2160

11576

-4674

3468

-3144

6581

Monetary authorities

-1338

3139

-3270

2328

-2973

4227

General government

0

0

0

0

0

0

Banks

2269

8437

-2169

1027

-157

2354

Other sectors

1229

0

765

113

-14

0

Other investment

-346

37649

125787

159717

-50929

131076

Assets (Latvia's loans to foreign countries etc.)

-111902

-17666

-4458

-157255

-28349

-96188

Monetary authorities

8

110

45

-283

61

88

General government

1854

1208

902

-12

-724

-155

Banks

-87935

-34665

8645

-181492

-2777

-83987

Other sectors

-25829

15681

-14051

24532

-24909

-12133

Liabilities (foreign loans to Latvia etc.)

111556

55315

130245

316972

-22580

227264

Monetary authorities

4878

-5594

-4200

-1941

-1663

-1341

General government

-944

-1271

121

186

-10348

-2356

Banks

120540

50039

122228

308314

-5408

209696

Other sectors

-12919

12141

12096

10413

-5161

21266

 

 

 

 

 

 

 

RESERVE ASSETS

8535

32347

-42173

2271

89298

-73300

 

 

 

 

 

 

 

NET ERRORS AND OMISSIONS

-13451

12917

-19147

-15547

12680

42068