The year 2023 was one of weak demand and geopolitical tensions in international goods markets. There are currently no signs of demand recovering rapidly in markets for goods. The Estonian economy was supported throughout the whole of last year by exports of services.

The turnover of Estonia’s foreign trade was down last year by a little over 5%, which means that exports and imports of goods and services were smaller than in 2022. Data from the balance of payments show that the turnover of exports of goods was down 16% in the fourth quarter, while the turnover of imports was also down 16%. The turnover of exports of services was up by 5% on a year previously though, while the turnover of imports of services was up 7%.

Exports of goods were mainly down because of the slump in manufacturing and in exports of fuels. All of the major exporting branches of manufacturing have declined. Exports remain weak in wood processing, which has been affected by the change in the market circumstances and by soft demand in Scandinavia. Exports of machinery and equipment and other manufactured products were also down over the year, though they were up a little in the monthly figures. The sector is affected not only by general overall demand but also by the cyclical nature of orders, which impacts the production of electronics for example. Exports of mineral fuels fell throughout the whole of last year.

The reduced need for inputs in manufacturing and the weakness of demand reduced imports. Imports of goods and services were down throughout the whole of last year, and the fourth quarter was no exception to this. More than half of the decline in the fourth quarter was caused by the reduction in the transport of mineral fuels. The decline in imports and exports of fuels will no longer be as steep this year, as the impact of sanctions and inflation pass out from the reference base.

Exports of services increased in the fourth quarter and were led by exports of telecommunication services. Growth in the turnover of exports was strong in ICT services at 17%, processing services at 12%, travel services at 6%, and other business services at 4%. Exports of transport services continued to be in decline, which was a direct consequence of the decline in the trade in goods and the changes in the market circumstances.

The current account deficit was small in the fourth quarter at 62.7 million euros, or 0.6% of GDP.

Exporting companies faced heavy competition pressure throughout the whole of last year. Estimates by business leaders of the economic outlook remain pessimistic. There were more businesses at the start of this year than there were a year earlier that believe the number of export orders will fall in the coming months. The opinion by businesses of their competitiveness improved a little at the start of the year, but pessimistic opinions remained in the majority. Exporters are in a difficult position as the need to adapt constantly and search for new markets has become the new normal. Demand is forecast to recover in Europe in the second half of the year.

Additional information:
Hanna Jürgenson
Communications Specialist
Eesti Pank
Tel: 5692 0930
Press enquiries: [email protected]