Analytics, Banks, Estonia, Export

International Internet Magazine. Baltic States news & analytics Friday, 06.12.2019, 01:16

Estonian economist: Export slowdown attributable to decline in shale oil products' export

BC, Tallinn, 12.08.2019.Print version
The deceleration of export growth to 4 % in the first half-year is largely attributable to a low result in June, the outcome was foremost affected by a strong decline in the export of shale oil products, Swedbank chief economist Tonu Mertsina said LETA/BNS.

"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%.

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