Foreign trade boosted the increase in economic activity
Economist at Eesti Pank
The total turnover of Estonia’s foreign trade is more than half as much again as it was a year ago. The dam burst in the second quarter for imports of goods that had previously been held up by the pandemic restrictions or by interruptions to supply chains. Increased demand provided a strong tailwind for further growth in exports of both goods and services.
The need for production inputs increased around the globe and demand in Estonia’s trading partners increased together with it. Exports of goods were up 36.5% in the second quarter. The figures for growth were high partly because they were so low a year earlier, and also because there was strong upward pressure on prices in global commodities markets. Growth in exports became more broadly based in the second quarter however. The biggest contributions to growth in exports came from exports of machinery and equipment and of mineral products.
Increased economic activity and some easing of supply problems supported a notable recovery in the services market. Services exports were up by 46.2% in the second quarter. This figure was also affected by the deep fall at the same time last year. The recovery in the supply of services has been varied. The market for transport services improved as expected in the second quarter as exports increased by 54%. Growth remained strong in the second quarter at 79% in telecommunications, computer and information services and the export turnover of those services was almost double what it was before the pandemic. The recovery in travel services that was hoped for in the summer remained modest, and exports of travel services have still not reached a third of where they were before the pandemic.
The total turnover of Estonia’s foreign trade grew strongly because imports increased. Imports of goods revived and grew by 49%, which is a good indicator that international supply networks have started to heal. Businesses are also rebuilding their depleted inventories to maintain the production capacity of industry. Imports of services grew for the third consecutive quarter because of a large purchase of computer services. The growth in the turnover of imports moved the current account balance into deficit by 8.6% of GDP. This is due to deficits on both the goods and services accounts, as Estonia imported more goods and more services in the second quarter than it exported.
Experts say the outlook for international trade is positive and it is expected that demand will increase in the near future. This is confirmed by the expectations of Estonian manufacturers for export orders, which were generally better in July and August than they were in the spring. There are risks around the availability of production inputs and about timely supplies, while the stocks of finished products are insufficient to satisfy increasing demand.
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