The impact of the pandemic on the trade in goods and services peaked in the second quarter
Falling foreign demand has reduced foreign trade volumes since the start of this year. The fall became much steeper in the second quarter, as the impact of restrictions introduced in international markets because of the pandemic peaked in April and May. Estonia’s exports and imports were down substantially in the second quarter as exports of goods and services were 21% lower than in the same quarter of last year, and imports were 24% lower.
The drop in imports and exports was quite broad across sectors. A large part of the fall in exports came from the drop of 9% in manufacturing exports, which are more than half of the total volume of exports. Among the larger groups of goods, mineral products and transport vehicles lost one third of exports, while exports of wood, wood products and food products fell by only 5%. Export volumes to all the largest trading partners fell, as exports to Finland were down by 8%, exports to Sweden by 10% and those to Germany by 12%. Exports to Latvia were down 16%, and those to Lithuania and Russia were down around a fifth.
Confidence in manufacturing and expectations for orders have improved since April and May, which may give hope that exports will stop falling in the third quarter. This is suggested by the advance indicators for manufacturing exports, as the index of sales volumes for output and tax receipts indicate that manufacturing exports have managed to recover over the summer.
Despite the drop in foreign trade volumes, the current account remained in surplus in the second quarter by 4.9% of GDP. The goods account was notably less in deficit than it was a year ago for the second consecutive quarter. The current account was again supported by the surplus on the services account, though there was a broad drop in trade in services in both exports and imports. It was particularly noticeable in the steep fall in volumes of travel services in April and May, and also in the falls in transport services, production services and maintenance and repair services, as only financial and insurance services saw growth remain positive.
The strong direct impact from the pandemic and the restrictions introduced in response to it was visible in Estonia’s foreign trade in second quarter as expected. The consequent global economic crisis will hit the Estonian economy in the second half of the year largely through foreign demand, which is recovering slowly. Exports of goods will be the first to pick up from their lowest point.
Eesti Pank publishes an economic policy comment on external sector statistics, together with a statistical infographic on the balance of payments that covers changes in the current and capital accounts, the financial account, the international investment position, and the external debt.