Analytics, Banks, Estonia, Export
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Thursday, 28.03.2024, 11:31
Estonian economist: Export slowdown attributable to decline in shale oil products' export
"While over the first few months of the year, export
growth of goods produced in Estonia survived the weakened external demand
rather well, in June, however, it sharply decelerated by a tenth.
Impact was largest in relation to a strong decline in the export of specific
shale oil products. The export of wood products and prefabricated wood
buildings also decreased," Mertsina said.
Export during the first half-year, however, increased by
over 200 mln euros year over year, which is largely attributable to the
segments of mechanical appliances, mobile communication equipment, prefabricated
wood buildings, wood products and measuring and precision instruments.
Exports increased most in the first half-year to the United
States, which placed third among Estonia's trade partners after Finland and
Sweden.
"A third of the growth, however, came from mobile
communication equipment, indicating that the growth was not broad-based. The
United States was followed by Denmark and Spain in terms of export increases,
which, however, were three times smaller than the growth to the United
States," Mertsina said.
Slower import growth in production inputs also affects
export growth as Estonia purchases the lion's share of its production inputs
from abroad. The import of goods declined altogether 8 % in June and the growth
also decelerated over the first six months of 2019.
The decline in the import of goods in June is mainly
attributable to a sharp drop in the import of production inputs. The latter
notably decelerated at the start of this year and has been in decline for the
past three months, which, according to Mertsina, forecasts a possible slowdown
in export growth for the coming months.
"GDP growth is not just dependent on our exports but
also on the differential between export and import growth as imports constitute
expenses. It is always negative in Estonia when it comes to goods -- the higher
the negative number, the more it reduces GDP growth. Foreign trade balance
was less negative in the first half-year than during the same period last year,
thus its hampering effect on economic growth was smaller," Mertsina said.
External demand, meanwhile, has weakened and entrepreneurs'
export expectations have deteriorated. World trade has been growing at a
reduced speed over the past months and the import growth of Estonia's largest
trade partners has decelerated. Estonia's industrial enterprises' expectations
for export, too, have sharply deteriorated.
"Even though the economic growth of our main trade
partners is slowing down this year and external demand is weakening, the trend
is largely attributable to the industrial sector in many states. The
preliminary statistics of dry bulk goods transported by ships and that of
container transport is showing signs of rapid improvement this year. On the
other hand, it's too early to tell when there will be any improvement to speak
of in world demand," the chief economist of Swedbank said.
Mertsina also noted that the short-term situation of
external demand largely depends on the trade conflict between the United States
and China, and the extent to which protectionism will spread in other states,
including the European Union.
"A no-deal Brexit continues to jeopardize the states of
the European Union -- even though it does not impose a direct strong effect on
Estonia, its negative impact through trade partners may prove to be
considerable. In Europe, the economic situation in Germany also worsened
due to firmer environmental regulations imposed on the automotive industry
in September last year, which have notably decreased the production of
cars," Mertsina said.
The economist added that central banks' measures aimed at
relaxing the monetary policy or preliminary notices thereof may mitigate
the situation of the real sector, should the economic situation deteriorate;
however, they have little effect on the negative impacts of decreased demand and
increased uncertainty.
In June 2019, compared to June 2018, the exports and imports
of goods decreased by 8%. A month earlier in May, exports had grown 8% on year
and imports 3%. In June 2018, however, exports grew 17% on year and imports 18%.