Analytics, Baltic, Banks, Economics, EU – Baltic States, Financial Services

Should the UK leave the EU without an agreement and trade relations between states revert to the rules of the World Trade Organization (WTO), the negative impact of the change in the volume of trade on the Estonian economy would be 0.19 percent of the gross domestic product (GDP), it appears from an analysis of Brexit's impact on Sweden and the Baltic states published by Swedbank.

The impact of increasing trade tariffs on Estonia would be 0.11% of GDP and the negative impact of other regulative changes 0.09% of GDP. The negative impact of a no-deal Brexit would be 0.39% of GDP on the Latvian economy, 0.41% of GDP on the Lithuanian economy and 0.28% on the Swedish economy.

According to Swedbank, the impact of import tariffs on Estonian import from the UK would be 17.3 mln euros, the increase in imported machinery and transport accounting for the largest part of it, altogether 5.9 mln euros. The impact would be 29.9 mln euros on Latvia, 39.8 mln euros on Lithuania and 341.8 mln euros on Sweden.

The negative impact of export tariffs on trade would be 7.9 mln euros for Estonia, 2 mln euros of which would be made up of the decrease in the competitiveness of manufactured goods. The impact on Latvia's export would be 20.2 mln euros, Lithuania would see a negative impact by 49.8 mln euros and the impact for Sweden would be 344.6 mln euros.

The negative impact of non-tariff barriers, like burdensome customs procedures, quotas or other discriminatory obstacles, would be approximately 20.3 mln euros on the Estonian economy. The impact would be 54.1 mln euros in Latvia, 81.4 mln euros in Lithuania and 661.4 mln euros in Sweden.

The negative impact of the export and import of services would be relatively bigger in Estonia, amounting to 36.3 mln euros. Approximately half of this would come from a decrease in the provision of transport services. The negative impact on Latvia would be approximately 41.2 mln euros, while the impact would be 34.6 mln euros in Lithuania and 458.6 mln euros in Sweden.

In general, the share of UK in the foreign trade of the Baltic states is not that high, remaining below 3%. However, the UK's importance is greater across certain sectors, for example in transport equipment as well as tobacco products.

In terms of the export of services, the finance sector may be the most vulnerable as the UK's share in Baltic export is the highest in this field -- approximately 20%. At that, altogether 23% of Estonia's financial services export goes to the UK.