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Analyst: Short-term outlook for Estonian exports not good

Furniture production at Wermo in Võru. Photo is illustrative.
Furniture production at Wermo in Võru. Photo is illustrative. Source: Mirjam Mõttus/ERR

The situation with Estonian exports remains poor, particularly in manufacturing, while some market players blame a labor shortage.

Exports fell by 14 percent on year to June, while the short-term outlook remains bleak, ETV news show "Aktuaalne kaamera" (AK) reported Thursday.

While re-exports remain at the level they were last year, Estonian exports themselves have been hardest hit.

Tõnu Mertsina, chief economist at Swedbank, Estonia's largest lender, told AK that: "On the one hand, the brake on foreign demand relates to the fact that China's economy is weak."

"The Chinese economy in turn exerts a very strong influence on the German economy. The German economy then influences other countries. /.../ In our view, demand is contracting more and more. And this means that the short-term outlook for exports is not a good one," Mertsina went on.

Peeter Kuum, marketing director at Wermo, a Võru-based furniture maker, told AK that exports are: "Perhaps a little lower than before the Covid pandemic. But in general, consumption is down everywhere in Europe, be it in respect of furniture or other items. People are still spending money on travel and some other things."

Head of the furniture manufacturers' union (Mööblitootjate liit) Enn Veskimägi said that: "This situation started exactly a year ago, when energy prices were rising at an insane rate. /.../ In Estonia, we have the highest inflation among European countries and the biggest economic recession. These two things together give us the situation we are in today," said the

Minister of IT and Economic Affairs Tiit Riisalo (Eesti 200) meanwhile said the current situation is "inevitable" and accompanies the restructuring of the economy.

He said. "In a sense, it is inevitable that, if we want to put an increasing emphasis on research-intensive production with high added value, then it just happens that way, in this developing world," said Riisalo.

At current prices, Estonian exports have been on the decline for around two years, while at constant prices, the level has fallen to where it was around five years ago.

The manufacturing sector has been hardest-hit so far.

Wermo's sales have fallen 20-30 percent recently, although this has to be seen in the light of the regular summer lull Peeter Kuum said.

Kuum noted that construction materials firms, companies dealing in metals, timber and other areas are also suffering. "The main issue is the structural deficit of the workforce, year after year, it doesn't matter how much work or no work we have, there's a definite shortage of workers, specialists."

Vocational education reform is needed, he added, before change can come.

As to whether those involved in furniture manufacturing should move into other areas, Minister Riisalo said: "This is the inevitability of the market economy, yes," a statement which had some industry players scratching their heads.

Peeter Kuum said that his company makes pinewood furniture, adding that this represents the highest added value possible, in the sector.

"We take the tree from the forest and produce the final item, which is passed on to the end consumer and goes into use, lasting maybe 20 or 30 years," Kuum said.

Enn Veskimägi noted that the furniture sector has not received any kind of support in any way, unlike producers of wood chippings and other timber-related products, which end up in the furnace (while woody biomass fuels were once regarded as eco-friendly, this is no longer the case – ed.).

Minister Riisalo pointed entrepreneurs to the joint Enterprise Estonia/KredEx state agency, now known as EISA, if they require support, while he directed those who have lost their jobs or who are unable to find one, to Töötukassa, the unemployment agency.

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Editor: Andrew Whyte, Merili Nael

Source: 'Aktuaalne kaamera'

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