The value of services exports was higher in the third quarter than it was before the pandemic
Economist at Eesti Pank
Estonia’s foreign trade grew strongly in the third quarter, mainly through demand from trading partners. Although growth in the economies of Estonia’s trading partners was less strong than expected in the third quarter, demand for exports remained high. Exports of Estonian goods and services were 30% larger than a year earlier, and imports were 28% greater. Both these figures reflect higher prices, as strong demand combined with supply-side restrictions has kept price pressures up. Prices are rising together for both exports and imports at the same time. The competitiveness of Estonian businesses overall has not deteriorated, though this can vary between sectors.
Exports of goods at current prices were 23.3% more in the third quarter than in the same quarter a year earlier. The biggest contributions to that growth came from exports of wood and wood products, machinery and equipment, and mineral products.
Imports of goods also increased in the third quarter and were up 30.3% over the year. Growth in imports has partly been encouraged by increased demand, and partly by the larger inventories than normal that companies are holding because of difficulties in supply chains.
The consistent increase in economic activity has supported exports of services from Estonia, and the value of those exports was higher in the third quarter than it was before the pandemic. Travel services have not recovered. Exports of services were up 44.3% over the year in the third quarter, and the biggest drivers were the low reference base from last year and the growth in prices. The biggest contributions to the growth in exports of services came from transport services, information and communication technology services (ICT), and other business services. As economic activity increased at the start of this year, demand was high for transport services and the turnover of transport services was 53% higher than it was a year earlier. Exports of ICT services increased very quickly for the third quarter in a row.
The increased exports of services meant that the current account balance was again in surplus in the third quarter, by 1.1% of GDP. The biggest contributions to the surplus on the services account came from the growth in exports of ICT services and other business services.
Businesses consider they have sufficient export orders and that demand remains, though supply problems remain the largest risk. Improvement is expected in foreign markets as inflation pressures ease and supply capacity improves.
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