International trade declined at the end of last year for the first time in a long time



Data from the Estonian balance of payments show that international trade in goods and services, which had been growing for a long time, declined in the final quarter of last year. This particularly affected exports of goods, which were down 2.7%. The general cooling of the global economy and the spread of the coronavirus will reduce foreign trade further in the first half of this year.

The fall in exports of goods at the end of last year came mainly in the energy sector, as the high price of CO2 quotas meant that electricity produced from oil shale was not competitive in the market. Estonia used to sell electricity to other countries, but now it buys it in. Growth in industrial exports was slowed by the general weakening in foreign demand. This particularly affected furniture makers and producers of electrical machinery and equipment. Imports of goods were down 1.3%. The current account was supported by the positive balance for services, as exports continue to grow in the fourth quarter in telecommunications, computer and information services, and in maintenance and repair services. The surplus on the current account was 0.6% of GDP in the fourth quarter of last year, which was smaller than in the previous two years.

Preliminary estimates suggest that exports were also lower in the first months of 2020 than they were a year previously. The confusion surrounding the outbreak of coronavirus, which has affected the global economy and especially international trade, will also touch Estonian companies whose activities are tightly interlinked with international supply chains. The East Asian region, which covers Japan, China, Hong Kong and Taiwan, accounts for 12% of Estonian imports in the estimate of the OECD. Given this background, it may be expected that indicators for foreign trade will fall even further in the first half of this year.

Although the general investment climate in Europe cooled last year in the face of political and economic risks, investment activity directed to Estonia has remained relatively good. Direct investment in Estonia increased by 13% last year, with the industrial sector receiving an increase of 9%.

The current and capital accounts were in surplus by a total of 118 million euros in the fourth quarter of 2019. This means that the Estonian economy was a net lender to the rest of the world, so Estonian investors put more financial assets abroad than they received from there.

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.

Additional information:
Hanna Jürgenson
Eesti Pank
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