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Swedbank: Short-term outlook for Estonia's industrial sector remains good

Swedbank Estonia chief economist Tõnu Mertsina.
Swedbank Estonia chief economist Tõnu Mertsina. Source: (Siim Lõvi/ERR)

Although the growth of Estonia's industrial sector has decelerated, the sector's outlook for the near term remains good, Swedbank chief economist Tõnu Mertsina said on Tuesday.

Where in the first and the second quarter industrial output volumes increased by approximately ten percent, in the third quarter growth slowed down to four percent on year, working day adjusted. This was caused on the one hand by a ten-percent reduction in energy production volumes, and deceleration of growth by respectively five and 24 percent in manufacturing and mining, Mertsina said in a press release.

In the third quarter, the biggest positive effect on growth originated in the manufacture of wood products, electrical equipment, metal products, foodstuffs and construction materials. The branches that held back growth the most were the manufacture of electronics products and beverages and maintenance and installation of machinery and equipment.

The economist said that approximately one-third of the deceleration in the growth in manufacturing output volumes can be ascribed to slower growth in shale oil products and a reduction in volumes in the maintenance and installation of machinery and equipment.

The export turnover of the manufacturing sector grew by just two percent on year in the third quarter, while sales on the domestic market increased by nine percent. In 13 of 23 fields of activity, export turnover either was declining or slower growth took place than in the previous quarter.

A major deceleration has taken place in the growth of the export of shale oil products, which slowed down to 60 percent on year in the third quarter from more than 300 percent in the first quarter and roughly 130 percent in the second quarter. A major reduction continued in the export of electronics products, which saw a drop of 21 percent in the third quarter.

The share of the sale of manufacturing output to external markets has dropped to 67 percent. The same appears from sales data for the third quarter, which shows businesses' export sales as having increased five percent,, while sales to the domestic market moved up ten percent compared to the same period last year.

"At the same time, orders increased in the third quarter in all areas of activity working on orders, save for the electronics industry," Mertsina noted. "In addition to the electronics industry, orders decreased in the garment industry and pharmaceutical industry as well."

Mertsina observed that although Estonia's industrial output has recorded solid growth this year, the peak of growth should be past now. As a matter of fact, he noted, the contribution of the industrial sector to economic growth has been rather modest this year. Of the 5.2 percent growth in the first half of the year, the industrial sector accounted for just 1.1 percent, or one-fifth, with most of the GDP growth generated by domestic demand.

The output of Estonia's industrial enterprises in September was bigger by four percent than in September 2016, as output increased in mining and quarrying but decreased in the energy sector, Statistics Estonia reported on Tuesday.

Editor: Aili Vahtla

Source: BNS

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