Pagari Liisu has been operating in Tallinn for 30 years and the only reason it can currently make ends meet is because it owns the shop, Wednesday's "AKtuaalne kaamera" (AK) reported.

"If we had to pay rent to somebody now, we would have closed the shop a long time ago," said Liis Veltmann, owner of Pagari Liisu. She said the business also made an expensive investment in solar panels this summer but this has paid off with energy savings.

Closure was considered at the start of the year, but now Veltmann is taking it one day at a time.

The Pagarini baked goods factory has reduced its production volume by approximately 20 percent due to the skyrocketing price of raw ingredients and energy rising.

"We have had made some price increases, but they do not match increases in raw materials and energy prices. Basic commodities such as eggs, flour, sugar have risen by 100 percent in a year and will continue to go up, you can see that trend continuing" said production manager Leivo Veimann.

As Estonian customers' purchasing power declines, the company is looking to the export market. But it will not be an easy solution.

He echoed the concerns of Estonia's wood and metal industry over lack of government support.

"It is very difficult to compete with producers in other countries because governments in other countries have made or are in the process of creating various support measures that will drive the cost prices of producers below those of Estonian producers," Veimann told AK.

"The trend shows that purchasing power is declining, and if businesses are not helped, I fear that Estonia could face a major wave of redundancies in January-February," he added.  

At Tallinn's Kalamaja Bakery there are no plans to lay off staff as the sector already has a labor shortage. If the economy rebounds new recruits may not be found when needed.

However, the bakery has raised its prices. While last year a slice cake cost €2.60, it now costs €2.80 or €3. Dairy products are main reason behind the increase.

"For us, it became a problem when the price of raw materials went up, and when transport went up, because then we were forced to raise our prices. But now, in the meantime, the whole situation has become even more expensive. We can't afford to raise prices anymore," said Karle Rahu, the owner of the Kalamaja bakery.

Rahu sees no other solution than to hope for new customers.

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