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Press Release of March 31, 2003  

(Adobe PDF version)

In the fourth quarter of 2002, the year-on-year decrease of the current account deficit was   68.2 million lats, totaling 150.3 million lats or 10.5% of GDP (in the fourth quarter of 2001, including and excluding purchase of ships 16.7% and 10.8% of GDP, respectively). Exports of goods increased by 21.5%, while imports of goods went up by 3.0%, hence the ratio of the goods deficit to GDP declined substantially (from 25.8% in the fourth quarter of 2001 to 19.7% in the fourth quarter of 2002).

 

In the fourth quarter, Latvia's exports of goods showed a year-on-year increase of 18.5%, and imports of goods rose by 15.6%. Despite a continued somewhat sluggish economic growth in Europe, exports increased to all EU countries (by 22.4%, reaching 60.9% of total exports). Exports to other countries reported a 16.2% growth, the largest rise being to Estonia, Lithuania, the United States and Norway. The year-on-year growth in exports was 57.9 million lats (most important goods being wood and articles of wood and base metals and articles of base metals).

A year-on-year increase in imports of all basic categories of import goods was recorded (96.1 million lats), the largest rise being in imports of machinery, mechanical appliances and electrical equipment, base metals and articles of base metals and the chemical and allied industries.

In the face of still persisting concerns about negative effects of declining transit sector upon Latvia's economy and payment balance, the services surplus was considerably high and reported a year-on-year increase of 6.0 million lats (to 75.3 million lats). The increase in exports of services (7.9 million lats) was due to the growth in the volume of travel and other services falling into the category of transportation services rendered to non-residents; in addition, the increase of transportation services by rail and road offset a decline in other services of transportation by sea related to the transit of oil and products of oil.

With an increase in non-residents'  income on direct investment, the income surplus reported a year-on-year decrease (13.6 million lats). The largest income on direct investment non-residents earned in the banking sector.

The year-on-year rise in the current transfer surplus was 22.3 million lats, which was primarily determined by an increase in transfers received by private persons.

The surplus of the capital and financial account was 170.7 million lats (including foreign direct investment of 29.7 million lats). Direct investment in Latvia was made in the amount of 32.9 million lats, of which the largest share (85.0%) went to enterprises' equity capital. Portfolio investment balance was negative (28.2 million lats), as residents (mainly banks) increased their investment in the bonds and notes of the OECD countries. A net inflow of 163.1 million lats was observed in other investment. On the liabilities side, other investment grew by 328.0 million lats, as banks primarily received deposits. On the assets side, other investment went up by 164.9 million lats, as  resources were placed in short-term deposits. The Bank of Latvia's reserve assets remained almost unchanged in the fourth quarter of 2002 (a fall by 2.3 million lats).

In 2002, the current account deficit of the payment balance decreased by 57.5 million lats in comparison with the previous year and was 403.1 million lats or 7.8% of GDP (in 2001, including and excluding purchase of ships 9.6% and 7.9%, respectively). Exports of goods, services and current transfers grew faster than imports. The ratio of the goods and current transfers balance to GDP improved, while the ratio of the services surplus to GDP remained unchanged. Though the economic growth rate in Europe was slow, the year-on-year increase in exports of goods was 14.1%; imports of goods increased by 10.5% reflecting high domestic demand.

The increase in exports of goods was determined by growing exports of wood and articles of wood, prepared foodstuffs, base metals and articles of base metals, miscellaneous manufactured articles as well as machinery and mechanical appliances and electrical equipment.

Imports of almost all major categories of goods went up, and only imports of mineral products lagged behind the level of the previous year. The largest growth was reported in imports of machinery, mechanical appliances and electrical equipment, transport vehicles, chemical and allied industries, prepared foodstuffs and base metals and articles of base metals.  

Regarding exports and imports of goods, the most important foreign trade partners of Latvia were the EU member states (60.4% and 53.0% of the total turnover, respectively). Exports to the EU countries grew by 10.6%. Exports to other countries also increased substantially (by 16.8%). Latvia's most important partners in export were Germany, the United Kingdom, Sweden, Lithuania, Estonia and Russia, and in imports - Germany, Lithuania, Russia, Finland and Sweden.

With services to non-residents growing, the services surplus reported a year-on-year increase of 26.0 million lats. The growth in travel services, transportation services by air, rail and road as well as other services rendered to non-residents offset the 2002 decline in the proceeds from other services of transportation by sea and pipeline transportation services, which was due to the reduction in transit of oil and oil products.

The year-on-year decrease in the income balance was 39.6 million lats, and it became negative mainly because of rapidly growing non-residents' income on direct investment and non-residents' income on other investment.

The current transfers surplus increased by 110.5 million lats, mainly owing to the growing volume of the transfers to private persons.

In 2002, Latvia reported the inflow of both long-term and short-term capital. The surplus of direct investment (240.4 million lats) covered 59.6% of the current account deficit and was equal to 4.6% of GDP. Residents (mainly banks through deposits and loans) received 625.2 million lats in other investment. The assets of other investment reported a year-on-year growth of 299.0 million lats, mainly through short-term deposits abroad made by banks. The assets of portfolio investment went up by 137.3 million lats. In 2002, no marked changes were observed in reserve assets.   

Latvia's Balance of Payments  
(in thousands of lats)

Item

 

2002
  I 1 II 1 III 1 IV
CURRENT ACCOUNT          
  Goods

-403120

-35948

-107277

-109634

-150262

    Credit (exports)

-888433

-170130

-215409

-219908

-282985

    Debit (imports)

1588232

348183

403748

418077

418224

  Services

-2476665

-518313

-619157

-637985

-701210

    Credit (exports)

337356

95335

95547

71170

75304

    Debit (imports)

773241

185148

204199

197615

186279

  Income

-435885

-89813

-108652

-126445

-110975

    Credit

-11788

6536

-21800

-11562

15038

    Debit

178202

43219

42367

42529

50087

  Current transfers

-189990

-36682

-64167

-54091

-35049

    Credit

159745

32311

34386

50666

42382

    Debit

330696

64510

71187

95173

99826

 

-170950

-32199

-36800

-44507

-57444

CAPITAL ACCOUNT

 

 

 

 

 

    Credit

10991

3676

2492

2221

2602

    Debit

15200

4382

3412

3878

3527

 

-4208

-706

-920

-1657

-926

FINANCIAL ACCOUNT

 

 

 

 

 

  Direct investments

432288

45723

91868

126560

168138

    Abroad

240440

68689

81242

60849

29660

    in Latvia

-5348

359

-2821

364

-3249

  Portfolio investment

245788

68331

84063

60486

32908

    Assets (investment in foreign securities)

-143301

-30708

-64387

-19968

-28238

      Equity securities

-137322

-30457

-64446

-14500

-27919

      Debt securities

-1725

-13136

879

1061

9472

        Bonds and notes

-135597

-17321

-65325

-15561

-37390

        Money market instruments

-166246

-26602

-75851

-25953

-37839

    Liabilities (foreign investment in Latvian securities)

30649

9282

10527

10392

448

      Equity securities

-5979

-251

59

-5468

-319

      Debt securities

14761

20451

8129

-13745

-74

        Bonds and notes

-20740

-20702

-8070

8278

-245

        Money market instruments

-19942

-19937

-8037

8278

-246

  Financial derivatives

-798

-766

-33

0

1

    Assets

7981

-447

5017

2065

1346

      Monetary authorities

-4549

-2607

-6559

6739

-2122

      General government

-1725

799

-4689

4372

-2207

      Banks

0

0

0

0

0

      Other sectors

-2178

-2767

-1870

2367

93

    Liabilities

-647

-639

0

0

-8

      Monetary authorities

12530

2160

11576

-4674

3468

      General government

859

-1338

3139

-3270

2328

      Banks

0

0

0

0

0

      Other sectors

9565

2269

8437

-2169

1027

  Other investment

2106

1229

0

765

113

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

326189

-346

37649

125787

163099

      Monetary authorities

-298965

-111902

-17666

-4458

-164938

      General government

-121

8

110

45

-283

      Banks

3952

1854

1208

902

-12

      Other sectors

-295446

-87935

-34665

8645

-181492

    Liabilities (foreign loans to Latvia etc.)

-7351

-25829

15681

-14051

16848

      Monetary authorities

625154

111556

55315

130245

328038

      General government

-6856

4878

-5594

-4200

-1941

      Banks

-1908

-944

-1271

121

186

      Other sectors

601121

120540

50039

122228

308314

 

32798

-12919

12141

12096

21479

RESERVE ASSETS

 

 

 

 

 

 

979

8535

32347

-42173

2271

Net errors and omissions

 

 

 

 

 

 

-40160

-13451

12917

-19147

-20478

1 Data have been revised.