Data from the balance of payments released this week shows that goods and services exports were up 10 percent and imports up 21 percent on year in the fourth quarter of 2022, according to a press release.

Although foreign trade measured in euros has increased, these strong growth figures are once again due to persistently high inflation, which has been caused by higher fuel and commodities prices, Rell pointed out.

Demand from Estonia's trading partners reached a low point at the end of last year, which in particular affected the exports of Estonian manufacturers. Goods exports increased by 8.9 percent in the fourth quarter, but in fact actually fell when taking inflation into account. Exports were down on year across most large groups of goods. The biggest contributors to growth were exports of machinery and equipment and of food products.

Imports, meanwhile, were affected last year by a general decline in demand as well as by sanctions placed on trade with Russia. The turnover of goods imports in the fourth quarter was about one fifth higher on year, but most of this figure came from higher prices; the actual volume of goods imported in fact fell. The growth in imports was once again driven by imports of mineral products, machinery and equipment as well as vehicles.

Exports of services continued to grow in the fourth quarter, but signs of this growth slowing down were present as well. Fourth quarter services exports were up 12 percent on year at current prices, according to balance of payments data.

Transport services exports have contracted as expected, and were down slightly on year last quarter. The sector was affected by the general decline in demand as well as by the drop in trade in goods with Russia. Growth picked up for travel services in the second half of last year, but has not yet fully returned to pre-COVID-19 pandemic levels.

Substantial contributions to services exports once again came from telecommunications and computer services as well as other business services.

In the fourth quarter of 2022, Estonia's current account went into a deficit of 0.5 percent GDP. The surplus on the services account gave the current account a boost, however the deficit on the goods account was larger than in previous quarters, impacted by increased imports of mineral fuels and reduced exports of electrical equipment.

Rell said that businesses' opinions about the economic climate were a little better at the start of this year than at the end of last, but noted that their expectations for the future remain very pessimistic.

Estonian businesses are most concerned about their competitiveness, both within Europe and in other foreign markets, the economist added.

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