The current account deficit widened to EUR186m in Q2 2017 from EUR37.2m in Q2’2016, according to data published by the Central Bank on Friday. The most notable contribution came from merchandise trade deficit which widened to EUR671m from EUR474m in Q2’2016. Exports grew by 9% y/y driven by the retained competitiveness of Latvian companies and strengthening external demand in light of the economic recovery in Russia and the CIS countries. However, import growth was stronger and increased by 14% y/y, underpinned by strengthening private consumption. Meanwhile, the services surplus rose by 6% y/y from EUR436m to EUR462m, primarily attributed to the strengthened performance of the tourist sector. The secondary income surplus rose by 16% y/y due to the intensified absorption of EU funds.
The financial account net outflow of EUR105m in Q2’2016 turned to a net inflow of EUR20m in Q2’2017. This largely reflected the issuance of EUR150m of Eurobonds by the Treasury. Meanwhile, FDI posted EUR55m net inflow compared to EUR237m net outflow a year ago. The net outflow of other investments rose to EUR353m in Q2’2017 from EUR222m in the same period last year.
Looking at the 12-m rolling figures, the CA surplus widened to EUR405m (1.5% of GDP) from EUR61m (0.2% of GDP) a year ago. This was driven by the services surplus, which increased and the primary income which turned from a deficit to a surplus. On the financing side, the financial account saw a net outflow of EUR249m from a net inflow of EUR29m.