The economies of Estonia's trading partners have been weak this year, reducing demand for goods and services from Estonia. Businesses both in Estonia and several of the country's main trading partners are feeling pessimistic about the third quarter, indicating that export difficulties still haven't eased, Bank of Estonia economist Mari Rell said Tuesday.
Foreign markets remained pessimistic in the second quarter, and the slump in demand caused foreign trade volumes to shrink, Rell said according to a press release. Businesses' estimates regarding the sufficiency of export orders are notably poorer in the third quarter of 2023 than they were in the second, indicating that difficulties still haven't eased.
The mood among businesses is pessimistic in several of the country's main trading partners as well. These trading partners' economies have been weak this year, which has reduced demand for goods and services from Estonia. The decline in trade in goods saw its foreign trade turnover fall on year as well.
In the second quarter of 2022, exports of goods fell by 9.6 percent on year, and imports by 11.4 percent. The turnover of exports of services, however, was up 7.9 percent on year, while services imports turnover was up 2.2 percent.
The difficulties faced by exports of goods come mainly from the downturn in manufacturing, where exports sales volumes were down in almost all areas in the second quarter.
Exports by companies in the wood sector continue to struggle, as demand is weak in the Scandinavian markets vital to them. In the second quarter, exports only grew in agriculture and food products, while stabilizing to some extent in metal products and machinery and equipment.
Goods imports fell for the second consecutive quarter. Various factors contributed to this, such as the earlier stocking of goods inventories, the reduced need for inputs in manufacturing as well as a fall in mineral fuels imports.
The turnover of imports of unprocessed wood, metals and manufactured goods were all down in the second quarter. Goods imports in the first half of the year declined largely due to falling fuel prices, while sanctions reduced imports of mineral fuels.
Services exports up, but outlook glum
Estonia's services exports, meanwhile, were up as a whole in the second quarter, with turnover up 7.9 percent on year and exports growing for ICT services, other business services as well as travel services.
As trade in goods declined, however, transport services exports followed, and problems in construction and the real estate market in Scandinavia led to a downturn in construction services exports — though some small recovery was apparent there in the second quarter.
The deficit on the current account stood at 3 percent GDP in the second quarter, due primarily to the surplus on the services account and because the deficit on the goods account narrowed.
Businesses in Estonia and Europe remain pessimistic in their expectations, however, thanks to deepening general economic uncertainty.
Estonian companies' estimates regarding their competitiveness were even poorer in the third quarter than they were last quarter, and several important export markets for Estonia are likewise feeling gloomy, with companies' competitiveness estimates low in Germany and Finland.
Editor: Aili Vahtla