The poor performance of foreign markets is hindering exports

Autori Mari Rell pilt

Mari Rell

Economist at Eesti Pank



The enduring pessimism in foreign markets has reduced demand in the most important markets for Estonian exports. The volume of Estonia’s foreign trade fell in the third quarter and the expectations of companies do not point to an improvement in the near future. Companies that consider that they have lost competitiveness and that export orders will decline in the coming months are in the majority.

Exports were mainly down in the third quarter because goods exports were weak, but the growth in exports of services has also diminished. Data from the balance of payments show exports of goods were down 23% in the third quarter and imports were down 17%. The turnover of exports of services was 1% larger in the third quarter than it was a year earlier, and the turnover of imports of services was up 3%.

Goods exports were mostly down because of the downturn in manufacturing. The downturn was evident in all the main sectors. Exports by companies in the wood sector continue to struggle, as the real estate and construction markets in Scandinavia are very weak. Machinery and equipment also played a notable part in the decline in the third quarter, mainly because of weakness in exports from the electronics sector. A decline in the turnover of exports of various fuels and electricity was also a major contributor to the drop in the turnover of exports and was mainly caused by a fall in prices from a year earlier and by the impact of sanctions passing out.

Imports of goods also fell in the third quarter. There were several reasons for this. Supply problems have been resolved and so stocks in warehouses are no longer being built up, while weak demand means that less material needs to be imported as inputs for production, and imports of mineral fuels dropped noticeably.

There was some slight growth in exports of services as a whole in the third quarter, but services exporters also noticed a drop in demand. The turnover of exports continued to grow in ICT services and travel services, while exports of transport services continued to be in decline, which was a direct consequence of the decline in the trade in goods. Exports of services were earlier supported by exports of other business services, but they were a little lower in the third quarter than a year before as the sector was also affected by the weak performance of foreign markets.

The current account deficit widened in the third quarter mainly because of the deterioration in the balance of goods. The current account was in deficit by 468 million euros, or 5% of GDP.

Deeper uncertainty about the economy is keeping the expectations of businesses pessimistic, and no improvement is particularly expected in the near future. Expectations of businesses are also poor in Estonia’s main export markets like Scandinavia and Latvia, though the estimates of Estonian companies stand out clearly for their pessimistic tone.

Additional information:
Evelin Jürisson
Communications Specialist
Eesti Pank
Tel: 6680 965
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