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Press Release of September 29, 2000

  

 

In the second quarter of 2000, the deficit of the balance-of-payments current account was 78.0 million lats or 7.4% of the gross domestic product (compared to 33.3 million lats or 3.5% of GDP in the first quarter of 2000). The increase in the deficit of the current account, over the first quarter of 2000, was mainly due to the negative balance of goods, which increased by 46.3 million lats. There were no significant changes in the positive balance of services, whereas the negative balance of income decreased by 6.6 million lats and the positive balance of current transfers decreased by 3.3 million lats.

In comparison to the first quarter, the export of goods increased by 6.7%, reaching 316.2 million lats, and the import of goods increased by 16.2% (to 474.2 million lats). The sharp rise in the import of goods in the second quarter of 2000 was attributable to the low import of goods in the first quarter of 2000 in several major categories of goods, such as machinery and mechanical appliances, electrical equipment, transport vehicles, products of the chemical and allied industries. This rise was also attributable to the traditional, seasonally high import of textiles and textile articles in the second quarter of year. Compared to the corresponding period of last year, the import of mineral products, base metals and articles of base metals increased mainly due to the rising world prices.

The positive balance of services reached 75.0 million lats and covered 47.5% of the negative balance of goods. In comparison to the corresponding period of last year, it increased by 21.5 million lats due to the improvement in balances of all groups of services. The positive balance of transport services increased by 4.8 million lats, primarily due to the increase in the export of sea transport services. While still negative, the balance of travel improved by 10.8 million lats due to the increase in expenditure by foreign travellers in Latvia and the reduction in expenditure by Latvian travellers abroad. The balance of other services improved by 5.9 million lats and became positive due to the rapid increase in the export of construction and financial services.

In comparison to the corresponding period of last year, income received by Latvian residents from abroad increased by 8.6 million, while non-residents' income from Latvia increased by 17.4 million lats over the same period of time. As a result, the income balance became negative and reached 6.5 million lats.

The positive balance of current transfers reached 11.4 million lats and covered 7.2% of the negative balance of goods.

In the second quarter of 2000, the deficit of the current account was financed primarily by long-term capital and foreign direct investment. During the reporting period, short-term capital investment by Latvian residents abroad exceeded those of non-residents in Latvia.

In the second quarter of 2000, non-residents' direct investment in Latvian businesses, which amounted to 55.0 million lats (5.2% of GDP), mostly took the form of investment in the equity capital and other capital. Latvian residents' direct investment abroad, primarily in the form of other capital, totalled 2.3 million lats.

Residents increased their liabilities to non-residents by 83.4 million lats in the form of other investment, while other investment by residents abroad increased by 87.4 million lats. The banking sector contributed the bulk of attracted funds and investment abroad, attracting 56.7 million lats and investing abroad 91.7 million lats, mostly in the form of cash and deposits by placing funds attracted from residents and non-residents. Other sectors attracted 28.9 million lats in the form of other investment by non-residents and reduced, by 2.5 million lats, such investment abroad. Other sectors attracted non-residents funds mostly in the form of long-term loans.

Though the volume of foreign currency inflow was sufficient to cover the deficit of the balance-of-payments current account and the Bank of Latvia did not make any interventions in the currency market, in general, Latvia's balance of payments was negative in the second quarter of 2000. During the reporting period reserve assets decreased by 11.8 million lats as the Bank of Latvia repaid a part of the IMF loan and Latvian government made payments for eurobonds issued in 1999.

Latvia's balance of payments 
2nd quarter of 2000

  (in thousands of lats)


CURRENT ACCOUNT -78 038
  Goods -157 924
    Credit (export) 316 241
    Debit (import) -474 165
  Services 74 982
    Credit (export) 187 289
    Debit (import) -112 307
  Income -6 511
    Credit 33 816
    Debit -40 327
  Current transfers 11 415
    Credit 25 077
    Debit -13 662
CAPITAL ACCOUNT 4 779
    Credit 5 071
    Debit -292
FINANCIAL ACCOUNT 63 252
  Direct investment 52 704
    Abroad -2 262
    In Latvia 54 966
  Portfolio investments 2 778
    Assets (investments in foreign securities) -1 650
      Equity securities -1 076
      Debt securities -574
          Bonds and promissory notes -16 314
          Money market instruments 14 946
          Financial derivatives 793
    Liabilities (foreign investments in Latvian securities) 4 428
      Equity securities 4 349
      Debt securities 79
          Bonds and promissory notes 2 416
          Money market instruments -2 329
          Financial derivatives -8
  Other investment -4 033
    Assets (Latvia's loans to foreign countries etc.) -87 407
    Monetary authorities 1 473
      General government 353
      Banks -91 728
      Other sectors 2 496
    Liabilities (foreign loans to Latvia etc.) 83 374
      Monetary authorities -1 637
      General government -567
      Banks 56 695
      Other sectors 28 883
RESERVE ASSETS 11 803
Net errors and omissions 10 007