2017-06-20
Lithuania’s exports have been growing by nearly one tenth for the fourth consecutive month. Increasing demand, particularly in the EU and CIS countries, should continue to drive our exports in the near term.
Data released on 9 June by Statistics Lithuania shows that the nominal exports of goods went up by 9.4 per cent over the year in April. This development was mainly due to the global price increase (especially in oil and food) early this year. However, the pre-existing trends described further indicate that the volume of the exports of goods was probably higher than a year ago, even if measured at constant prices.
Nerijus Černiauskas, Senior Economist, Macroeconomics and Forecasting Division, Bank of Lithuania
Export volumes in April were supported by the exports of goods of Lithuanian origin and by the re-exports of goods made in other countries. Although the exports of mineral products, which have increased at nominal value due to higher oil prices, played a relatively major role, export volumes were more affected by other factors.
The exports of Lithuanian-origin goods to EU countries, especially Scandinavia, Poland and the Netherlands, showed the strongest growth. The reasons behind the acceleration of exports to these markets may be the following: the Nordic countries attract Lithuanian exporters with the possibility to boost prices, Poland – by the size of its economy, growth and geographic proximity, while the Netherlands and its well-developed port infrastructure may offer exporters access to markets other than the EU. The recent surge of imports in the Netherlands reflects a strong growth in international trade. Aggregate world trade indicators also suggest an increase in international trade. For example, CPB Netherlands Bureau of Economic Policy Analysis announced that total global imports increased by 5 per cent in March of this year in comparison to hardly reaching one and a half per cent last year.
The increase in global international trade may be considered as the most significant factor that explains why more goods of Lithuanian origin have been exported not only to the Netherlands but also to other countries. A sudden intensification of the entire global trade is partly due to the increase in Chinese imports at the beginning of the year. The rise in oil and food prices allowed exporters of these goods to generate more income and raise their own imports, thereby also contributing to global trade pick up. Even though China and a large part of oil and food exporters (excluding Russia) are not Lithuania’s most important trade partners, their import increase boosted trade within the EU (including the Netherlands). Lithuanian exporters also benefit from more intensive intra-EU trade.
The growth of re-exports in April could be best explained by the recent improvement in the CIS countries that demonstrate the growth in demand for goods. The annual growth in re-exports to Russia and other CIS countries have been robust as of the end of 2016. The data for March 2017 indicate that Russia’s imports of goods went up by approximately one fourth, and the rouble appreciated by 15 per cent against the euro in April. Re-exports to Belarus are increasing at a similar rate.
Near-term export growth could be driven by a number of reasons. Surveys carried out by the Lithuanian Confederation of Industrialists indicate that many industries, especially metals, machinery and equipment, intend to further utilise their existing production capacities in the near future. The data on new orders of industrial products for the second quarter of 2017 and the general industry expectations are positive. Recent stronger growth of investment will increase the production capacity of the exporting sector. Approximately one third of Lithuanian industrial companies report that the current demand level is too low and approximately one fifth of the production capacity has not been used yet. Spare capacity usually shows a lack of buyers for manufactured production. It is relatively easy to increase production and exports if the number of buyers keeps growing.
There is a risk that Lithuania’s income from exports will moderate. Already in April, the data on the exports of goods exhibited a downward trend in comparison to those gathered earlier. Industrial production decreased by 0.6 per cent month on month in April 2017; oil and food prices were also lower in comparison to those observed at the beginning of the year. With regard to a steep increase of Chinese imports at the beginning of the year, it is agreed that it was a temporary trend. This is confirmed by the data on industrial production, investment and trade from April which were weaker than expected.