Economist: Pessimism down but major industrial uptick not on the horizon
Production volume continues to shrink in the processing industry, by 5.7 percent on year in March. Bank of Estonia economist Kaspar Oja said that while businesses have become a little more optimistic, production will not grow notably in the near future.
Production volume has been shrinking for 22 consecutive months in the processing industry. Once again, the timber industry was the fastest to contact in March.
Kunda-based pulp mill Estonian Cell said Monday that it made a loss of €23 million last year, and that it was forced to temporarily shut down its factory and lay off staff as a result.
"Both energy and timber prices have doubled since before the crisis. Estonian Cell has the added problem of regulated fees and taxes the biggest of which is the renewable energy fee, which for us comes to almost two and a half million annually. During the time we've been active, we've paid €30 million, while now that the plant needs support to remain competitive, there seems to be nothing available," Estonian Cell board member Siiri Lahe said.
Close to a fifth of the reduction in production volume happened in the metal products, electrical devices and electronics sector. Lagedi-based company Inission makes products that fall into these categories.
"The final quarter [of last year] was difficult for us, while things have improved a little in the first quarter now. Things will stabilize, looking to the future. It seems there is some adjustment, and we rather take a positive outlook. /.../ Some sectors fall, while others are growing, which has allowed us to maintain stability," said Allan Saariste, head of sales for Inission Tallinn.
The factory recently invested two million euros in a unique robotized work center in the Baltics in an attempt to remain competitive.
Bank of Estonia economist Kaspar Oja said that industrial volumes have plateaued over the last six months after a protracted downturn.
"Pessimism is not as bad as it has been in recent months. But stock assessments still suggest there are surpluses and production is not estimated to grow in the near future," Oja said.
"The hope in forecasts for a better second half-year largely rests on companies saying they've secured new orders and contracts, which might translate into results eventually. But no strong indicators can yet be seen."
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Editor: Merili Nael, Marcus Turovski
