The future is uncertain for Estonian exporters
Economist at Eesti Pankt
Data from the balance of payments show that Estonia’s exports of goods and services were 6.6% more in the last quarter of 2018 than in the last quarter of 2017. Growth slowed at the end of last year in the exports of goods and services from most euro area countries, but in Estonia export growth was fast. It is likely though that the uncertainty in Europe will start to apply the brakes to Estonian export growth soon.
Some three quarters of Estonia’s exports go to the European Union. Dark clouds cast shadows over the outlook for the economies of Estonia and the rest of the world in the final quarter of last year. The economy in the European Union was affected by the danger of negative effects from the erupting trade war and the lack of clarity about global trade policy, widening social tensions in France and Spain, uncertainty about Brexit, the large debt burdens of some countries, fiscal policy strains and problems in the car industry. Different countries were affected differently, but the impacts were negative almost everywhere, and were mainly felt at the same time. In consequence growth in demand from Estonia’s foreign partners for imported goods and services slowed to 1.3% in the fourth quarter of 2018.
Exports of Estonian goods and services have exceeded imports for more than a decade now and the current account of the balance of payments has been in surplus for six years. There may be various causes behind the current account surplus. It may be due to the strong development of exports, but people and companies have also held back their consumption and investment in Estonia, weakening demand for imports by doing so. The current account surplus means that more uncommitted savings can be invested abroad, the foreign debt can be reduced, and the state investment position improved. Statistics for the external debt show that at the end of 2018, the debt claims of Estonian residents on foreign residents grew to be 4.6 billion euros, or 18% of GDP, larger than their debt liabilities. At the same time the shortage of investment could have a harmful effect on the rapidly growing economy and restrict the capacity for growth in the future.
Eesti Pank releases an economic policy comment on the external sector statistics it collects and a statistical release on the balance of payments statistics that discusses changes in the current and capital accounts, the financial account, the international investment position and the external debt.
Eesti Pank will release the statistics for the balance of payments and the external debt for the second quarter of 2019 together with an economic policy and statistical comment on 11 June 2019.
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