The external trade deficit declined by 70.8% y/y to EUR68.8m in December, data of the stat office showed on Friday. The strong fall in the trade gap was the result of imports growth easing significantly in the single-digit growth area while exports growth remained strong amid a slight deceleration. In 2017 as a whole the trade deficit came at EUR2.3bn which is 11.5% higher compared to 2016 as both exports and imports expanded strongly by close to 17% during the year.
Exports increased by 16.9% y/y in 2017, maintaining the same rate of increase from Jan-Nov with exports of investment and intermediate goods having the largest contribution to growth during the year. High value added capital goods were once again responsible for the strong growth of exports as a result of robust economic and investment activity in Europe and the region in general. Exports to EU countries increased by 12.2% in 2017 while exports to Russia were particularly strong at 29.3%. On the downside, exports to Poland remained rather weak at 4.4% y/y while exports to the UK declined by 3.7% in 2017. On the imports side, the data was similar with imports in 2017 rising by 16.5%, easing from 17.4% in Jan-Nov and driven by imports of intermediate and capital goods.
All in all, external trade activity was particularly strong in 2017, however, the contribution to GDP from the goods trade was likely negative although data shows it was compensated by positive contribution from services trade. Expectations are that growth of trade will ease in 2018 to more sustainable levels although we still expect to see relatively strong growth of imports and exports driven by economic activity in Lithuania and the region while rising commodity prices will also boost the nominal data.