The Estonian Economy
Monthly newsletter from Swedbank’s Economic Research Department, continued Nr 1 • 12 March 2013
Contributions to GDP growth, pp
-30-25-20-15-10-5051015202007 2008 2009 2010 2011 2012Net exports GDP Domestic demandSource: SE
Russia is growing increasingly importantas an export partner
Nominal growth of Estonia’s exports of goodsdecelerated from 37% in 2011 to 4% in 2012.Besides weakened foreign demand, the growth ratealso decelerated due to the high base in 2011 whenthe economy was still recovering from the crisis.Estonia’s largest export partners have been mainlyits neighboring countries. For the first time in years,the share of the euro area in exports of goods fellbelow 30%. The decrease was strongly influencedby Finland (which accounts for over half of Estonia's export to the euro area), whose share fellfrom 26% in 2005 to 15% in 2012. However, thevalue of export to Finland has not fallen.
Shares of main export partners (export of goods)
40,430,531,2 31,534,231,030,028,423,228,925,1 23,925,526,124,624,913,112,313,313,812,615,615,615,96,57,88,810,49,39,710,912,09,19,111,510,09,58,98,08,83,16,6 4,2 4,84,2 3,86,2 4,74,64,95,95,74,85,04,65,40%20%40%60%80%100%2005 2006 2007 2008 2009 2010 2011 2012LithuaniaUSALatviaRussiaSwedenOthersEuro areaSource: SE
Economic conditions in some of Estonia's mainexport partners, Sweden and Finland, worsened inthe second half of 2012; in Finland, somewhatearlier. Fortunately, this was partially compensatedby strong exports to the other Baltic countries andRussia. The largest contributor to overall exportgrowth was Russia, at 2 percentage points (pp),and Latvia, Lithuania, and Sweden, all at 1 pp.Whereas in 2011, the euro area contributed 10 ppand the US 5 pp to overall growth, in 2012 their contributions were negative (-0.4 and -1.4 pp,respectively).Russia has become more important to Estonia for exports, increasing its share from 6% to 12% ineight years and growing by over 400%.Althoughthese numbers are impressive, the estimated re-exports are over 40%
of the total exports toRussia. Last year, exports showed strong growth inthe first three quarters, growing annually by around20% in each, but in the last quarter growthdecelerated to nearly 0%. This fall could partially beexplained by the high base in 2011, but also by theslowdown in growth seen in Russia.The main export articles to Russia in 2012 weremachinery and mechanical equipment, with nearly a40% share of total exports. This sector has shownmassive growth during the past five years (over 350%) and continued its upward trend in mostmonths of 2012.Other large export articles -chemical products and food products andbeverages (both alcoholic and nonalcoholic) - alsogrew in volume. In 2012, Russia joined the WTO,which means lower customs tariffs and adopting thesame regulations as other members. This shouldboost exports to Russia even more.Exports to Sweden, despite the slowdown andnegative sentiments in the second half of the year,grew by nearly 7% in 2012. Over half of the exportswere electrical equipment, followed by wood andwood products and mineral products (mostly fuel).In January, the Swedish purchasing managers’index (PMI) rose notably (by 4.6 points to 49.2),indicating that the Swedish manufacturing sector isshowing the first signs of stabilisation. This shouldbe positive news for all Estonian subcontractorswho depend directly on how the Swedishmanufacturing sector is doing.Exports to Latvia grew by nearly 15% in nominalterms in 2012 and crossed the EUR 1 billion line.Growth was rather strong in the first quarter (30%year on year (yoy)), but decelerated at the end of the year (10% yoy). The largest export articles lastyear were vehicles and vehicle parts/accessories,and machinery and mechanical equipment (both14% of total exports), followed by metals and metalproducts (10%) and food products (8%).
Estimationby Statistics Estonia