Estonia's foreign trade remained strong in the first quarter
Economist at Eesti Pank
The economies of Estonia's main trading partners continued to grow at the start of the year, and the overall position of Estonia's foreign trade remained strong in the first quarter. Balance of payments data show the total turnover of foreign trade in the first quarter was bigger than it was a year earlier by more than a quarter. Exports of goods and services increased by 31%, while imports of goods and services were up 24%. The increase was driven not only by demand, but also by large rises in the prices of exports and imports.
There were disruptions to global trade at the start of the year that came from the wave of the pandemic in China and the geopolitical tensions caused by war. This affected the prices and availability of commodities. Companies built up their inventories rapidly in consequence in the first quarter, which caused imports of goods to increase. Those imports were 40% larger in first quarter than they were a year earlier. The main imports were of fertilisers, machinery and mechanical equipment, and metals.
The good economic performance of Estonia's trading partners at the start of the year supported demand for Estonian exports, and so exports of goods and services remained strong. Exports of goods were 36% up over the year at current prices in the first quarter. The biggest contributions to the growth in exports of goods came from exports of mineral products, wood and wood products, and machinery and equipment. Balance of payments data show that exports of services at current prices were up 22% in the first quarter. Exports of services continue to be supported by telecommunications and computer services, and transport services, but there was also a clear recovery in exports of travel services in the first quarter.
The current account was in surplus by 1.4% of GDP in the first quarter thanks to the surplus on the services account, as Estonia exported more services than it bought from abroad. The balance of exports and imports of goods was in deficit by 450 million euros in the first quarter, principally because of the increase in imports of goods.
The sanctions on Russia will start to hinder Estonia's foreign trade in the second half of the year. The impact of sanctions will be felt directly and also indirectly through reductions in demand for Estonia's trading partners. Upwards price pressures will remain and will make businesses less competitive. Survey data show though that Estonian companies expect export orders to be good in the coming months, and they do not feel any loss of competitiveness.
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