While industrial production in Estonia has fallen for 11 months in a row, April's drop is the biggest to date. The decline in Estonia's manufacturing output is the biggest in Europe and has taken the country's output back to 2018 levels.

The situation is currently most difficult in the timber industry, where this year one major housing company has already gone bankrupt, while Estonia's largest in the sector has run into difficulties.

Production has become more expensive in Estonia and it is also harder to sell across borders.

"Demand has fallen, including for wood products. But on top of that we have domestic problems. Certainly, due to the state's decisions or its inability to buy, timber prices are higher than in competing countries, which means that Estonian industry is losing its competitiveness. In addition, of course, there is the constant playing around with felling volumes. /.../ Quite a number of Estonian sawmills also import sawn timber from Norway, because Norwegian wages tend to be cheaper than local Estonian wages. This is not really normal," said Margus Kohava, head of the Estonian Forest and Wood Industries Association (Metsa- ja puidutööstuse liit).

However, Kohava said, all forest-based industries are trying their best to cope. The biggest number of lay-offs came last year, when Russian timber could no longer be used.

In the BLRT Grupp, the largest industrial holding in the Baltic countries, three industries are in decline.

"In construction, we've seen a 25 percent fall. We've got fittings, metalwork and other products that we supply to construction - there's been a drop-off. The other sector we are working in is food. Industrial gases and nitrogen orders are also down around 15-20 percent. /.../ We've seen a relatively big drop in engineering too - up to 30 percent," said Roman Vinartšuk, advisor to the BLRT Group's management.

According to Vinartšuk, while the company is driven by shipbuilding, there could now be more work available in ship repairs.

"It's performing much better than it did during the Covid period for example, when we ran out of orders for cruise ships. Now we are seeing growth dynamics," Vinartšuk said.

Estonia is in a severe and broad-based recession, said SEB analyst Mihkel Nestor. As the trade and manufacturing sectors are Estonia's biggest employers, the industrial downturn is starting to affect the people who work in those areas.

"Companies have been sitting on the sidelines, hoping that things will get better soon. In some areas, that might even happen, but in the big sectors, especially in the Nordic countries, which were involved in the local construction market, it will take some time. And that's time that, unfortunately, probably not everyone can wait out with the workforce they have now," Nestor said.

"The timber industry, which is experiencing a very big drop in production volumes, is not located in Tallinn. It is mainly located somewhere in South Estonia, further away from the capital. It is precisely in the regions that this could cause fairly big problems," the analyst added.

However, Nestor does believe that the downturn will start to ease off in the second half of the year.

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