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SEB: Broad-based export decline likely in Estonia in 2nd half of 2019

BC, Tallinn, 13.09.2019.Print version
SEB analyst Mihkel Nestor said that it is likely that exports are likely to decline more broadly in the second half of this year, writes LETA/BNS.

Nestor said that, alongside the pension reform and state budget, the situation in foreign trade is emerging as one of the topical problems of the Estonian economy. "This week's announcement by Statistics Estonia, according to which the export of Estonian goods in July was one of the lowest in recent years, had an alarming ring to it. Thus, exports of goods produced in Estonia have been decreasing by 10 percent for two consecutive months already," he said in a press release.


At the same time, the analyst said that, regardless of decline, the actual picture was significantly better in July as the drop was to a great extent caused only by one goods group -- mineral products, that is various fuels. Compared to July of the previous year, their sales decreased by more than 100 mln euros, or nearly 60%.


At the same time, the reference base was also very high -- while Estonia usually exports mineral fuels worth an average of 120 million euros per month, this indicator reached 190 mln euros in July of last year.


Nestor said that, excluding the mineral fuels group, exports of goods produced in Estonia would have increased by as much as 4 percent. "On the positive side, exports of various machinery and equipment increased strongly in July, but also sales of prefabricated houses, for example, which have been challenged by the slowing construction market in the Nordic countries," he said.


Nevertheless, the analyst said it is likely that a more broad-based export decline will be seen in the second half of 2019. Alongside the background of negative news about the global economy, the industry's pessimistic outlook for the future is also indicative of this, he said. Namely, according to seasonally adjusted data, the last time the economic confidence of Estonian industrial sector companies was this low was in 2010.


"To be more specific, this is caused by the fear of becoming jobless. Although the production volumes of companies have been quite high so far, new orders, especially for export, have been scarce. The negative view of industrial companies fits in well with the situation of our main trading partners. The confidence of industrial companies in Finland, Sweden and Germany has been in decline since early 2018, although indexes have not yet fallen as low there as they are in Estonia," Nestor said.


The analyst said that traces of the spreading insecurity lead to the heart of the European industrial sector, Germany. Germany's own industrial production has been in decline since mid-2018. "As time goes on, the concerns there will start spreading to other countries. More serious difficulties have recently been caused to Finland, Germany's most important trading partner, by the weakness of the local economy in Germany," he said.


While Finland exported nearly 3 bn euros' worth to Germany in the second quarter of 2018, the indicator stood at only 2.4 bn euros' worth, that is nearly a fifth less, in the second quarter of this year. "Considering the footprint of Finnish industrial enterprises in Estonia through the network of subsidiaries and subcontractors, we will see the results of this soon here as well," Nestor said.






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