Latvia’s November 2025 Balance of Trade: A Deepening Deficit Amid Mixed Signals
The latest Balance of Trade (BoT) for Latvia reveals a widening deficit of -356 million EUR in October 2025, surpassing expectations and reversing the prior month’s improvement. This marks a significant deterioration compared to the -230 million EUR recorded in September. The persistent trade shortfall reflects ongoing external pressures, including supply chain disruptions and geopolitical tensions. Monetary policy remains cautious amid inflationary risks, while fiscal measures aim to support competitiveness. Financial markets showed muted reactions, signaling uncertainty. Structural challenges in export diversification persist, suggesting a cautious outlook for Latvia’s external accounts in the near term.
Table of Contents
Latvia’s Balance of Trade (BoT) for October 2025 posted a deficit of -356 million EUR, according to the Sigmanomics database. This figure exceeded the market estimate of -350 million EUR and marked a sharp deterioration from September’s -230 million EUR. The deficit remains elevated compared to the 12-month average of approximately -320 million EUR, signaling persistent external imbalances.
Drivers this month
- Energy imports surged by 15% MoM, driven by higher global oil and gas prices.
- Export volumes contracted 3.50% YoY, notably in machinery and wood products.
- Supply chain bottlenecks in Eastern Europe delayed shipments, impacting trade flows.
Policy pulse
The BoT deficit remains a concern for Latvia’s central bank, which is balancing inflation control with growth support. The current trade shortfall exceeds the central bank’s comfort zone, complicating monetary policy calibration amid tightening global financial conditions.
Market lens
Immediate reaction: The EUR/LVL currency pair depreciated 0.30% within the first hour post-release, reflecting concerns over external vulnerabilities. Sovereign bond yields edged up by 5 basis points, signaling modest risk repricing.
Examining core macroeconomic indicators alongside the BoT reveals a mixed picture. Latvia’s GDP growth slowed to 1.20% YoY in Q3 2025, down from 1.80% in Q2, partly due to weaker export demand. Inflation remains elevated at 4.70% YoY, pressuring real incomes and consumption.
Monetary Policy & Financial Conditions
The Bank of Latvia has maintained a cautious stance, keeping the policy rate steady at 2.25%. Financial conditions tightened slightly as global central banks signaled further rate hikes. Credit growth slowed to 3.10% YoY, reflecting cautious lending amid economic uncertainty.
Fiscal Policy & Government Budget
Fiscal policy remains moderately expansionary, with a 2025 budget deficit forecast at 2.80% of GDP. Government spending focuses on infrastructure and export promotion programs, aiming to offset external headwinds. However, rising debt service costs limit fiscal space.
Market lens
Immediate reaction: EUR/LVL depreciated 0.30%, while 2-year government bond yields rose 5 basis points, reflecting increased risk premium on external imbalances.
This chart highlights a clear trend of widening trade deficits since mid-2025, reversing a short-lived improvement in early autumn. The data suggests Latvia’s external sector remains vulnerable to global price shocks and supply chain disruptions, with implications for currency stability and monetary policy.
Looking ahead, Latvia’s BoT trajectory hinges on several factors, including global commodity prices, regional geopolitical developments, and domestic policy responses. Three scenarios emerge:
Bullish scenario (25% probability)
- Global energy prices stabilize or decline, easing import costs.
- Export demand recovers due to improved EU growth and supply chain normalization.
- Fiscal stimulus boosts competitiveness, narrowing the deficit to -250 million EUR by Q1 2026.
Base scenario (50% probability)
- Energy prices remain elevated but volatile.
- Exports grow modestly, offsetting some import pressures.
- BoT deficit stabilizes around -350 million EUR in the near term.
Bearish scenario (25% probability)
- Geopolitical tensions escalate, disrupting trade routes.
- Energy prices spike further, worsening the import bill.
- BoT deficit widens beyond -400 million EUR, pressuring the currency and fiscal balances.
Structural & Long-Run Trends
Latvia’s persistent trade deficits reflect structural challenges, including limited export diversification and reliance on energy imports. Long-term efforts to enhance value-added exports and energy efficiency remain critical to improving external sustainability.
Latvia’s October 2025 Balance of Trade data underscores ongoing external vulnerabilities amid a complex global environment. While the deficit widened sharply, policy measures and market adjustments may help stabilize the outlook. Close monitoring of energy markets, geopolitical risks, and domestic reforms will be essential to navigate the coming quarters.
Key Markets Likely to React to Balance of Trade
The Balance of Trade is a critical indicator for several markets. The EUR/LVL currency pair is highly sensitive to trade flows, as deficits can weaken the currency. Sovereign bonds reflect risk sentiment tied to external imbalances. Additionally, energy-related stocks and commodities often correlate with import cost fluctuations. Below are five tradable symbols historically linked to Latvia’s trade dynamics:
- EURUSD – Major currency pair reflecting Eurozone trade and monetary policy impacts.
- ENI – Energy sector stock sensitive to oil price changes affecting Latvia’s import costs.
- USDEUR – Inverse of EURUSD, relevant for cross-border trade valuation.
- BTCUSD – Bitcoin’s price movements often reflect broader risk sentiment impacting emerging European markets.
- SAP – Large European exporter, indicative of regional export trends influencing Latvia’s trade environment.
Insight: Balance of Trade vs. EURUSD Since 2020
Since 2020, Latvia’s trade deficits have shown a moderate inverse correlation with EURUSD movements. Periods of widening deficits often coincide with EURUSD depreciation, reflecting external pressures on the Eurozone currency. For example, the 2025 mid-year surge in Latvia’s deficit aligned with a 2% EURUSD decline, underscoring the currency’s sensitivity to trade fundamentals.
FAQ
- What is the significance of Latvia’s Balance of Trade?
- The Balance of Trade measures the difference between exports and imports, indicating external economic health and currency pressure.
- How does the Balance of Trade affect Latvia’s monetary policy?
- A widening deficit can pressure the currency and inflation, influencing central bank decisions on interest rates and liquidity.
- What are the main risks to Latvia’s trade balance?
- Key risks include volatile energy prices, geopolitical tensions, and supply chain disruptions impacting exports and imports.
Key takeaway: Latvia’s expanding trade deficit in October 2025 highlights external vulnerabilities amid global uncertainties, requiring vigilant policy and market responses.
Sources: Sigmanomics database[1], Latvia Central Statistical Bureau[2], Bank of Latvia[3], European Central Bank[4], International Energy Agency[5]









The latest BoT deficit of -356 million EUR in October 2025 represents a 55% increase from September’s -230 million EUR and is 11% worse than the 12-month average of -320 million EUR. This reversal follows a brief improvement in September, which had marked the lowest deficit since May 2025.
Historical data from the Sigmanomics database shows that Latvia’s trade deficit has fluctuated between -147 million EUR in April and a peak of -514 million EUR in September 2025. The current reading signals renewed pressure on external balances, driven by rising import costs and subdued export growth.