Growth was strong in Estonian exports at the end of the year, but it will be less so moving forwards
Economist at Eesti Pank
Estonia’s foreign trade was encouraged last year by the good position of the global economy and by strong demand in Estonia’s trading partners for Estonian exports. This allowed Estonia to increase its market share for exports last year. Exports of Estonian goods and services were 39% larger than a year earlier in the fourth quarter, and imports were 11% greater. This is partly because prices were rising fast, as prices were up for both exports and imports.
The market share for Estonian exports increased last year particularly for exports of goods. These were up 23.5% at current prices on the fourth quarter of 2020. The biggest contributions to the growth in exports of goods came from exports of mineral products, wood and wood products, and machinery and equipment.
Estonia’s need for imported goods remained large throughout last year. Imports of goods in the fourth quarter were up 31.7% at current prices on the same quarter of 2020. Estonian businesses restocked their inventories, which had been reduced because of supply problems caused by the pandemic. Increased demand also meant that there was a need for additional production inputs. Strong consumption also increased the demand for consumer goods.
Trade in services also broadly recovered in the fourth quarter of last year. Exports of services were up 78.6% over the year in the fourth quarter. That growth was affected by the low reference base from the previous year, and by rising prices. The biggest contributions to the growth in exports of services came from transport services, telecommunications and computer services, and export revenues from fees for using intellectual property. The recovery in travel services at the end of the year was still very modest, as further waves of the virus continued to restrict travel.
As exports of services were larger than imports in the fourth quarter, the services account and the balance of the Estonian current account were again in surplus. The Estonian current account was in surplus by 5.8% of GDP in the fourth quarter. The goods account remained in deficit in the quarter.
Developments in foreign trade this year will be affected by the Russian invasion of Ukraine at the end of February. The sanctions on Russia will have some impact on Estonia’s foreign trade both directly and indirectly through the exchange of goods with Estonian trading partners. Equally, prices pressures are not expected to ease.
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