The merchandise trade deficit widened by 91.0% y/y to EUR157.4m in September, according to figures of the statistical office, published on Monday. Exports continued to decline for the fourth consecutive month, down by 2.4% y/y in September, from a drop of 2.5% y/y in August. Top destination countries of Estonia’s exports in September were Finland (17% of total), Sweden (10%) and Latvia (9%). The most considerable decrease was registered by exports to the US and Singapore driven by electrical equipment and mineral products, respectively. On a more positive note, the most notable increase was marked by agricultural products and food preparations, partially supported by favorable crop yield this year, in our view.
Meanwhile, imports increased by 3.4% y/y, following a notable drop in August. The increase is likely partially supported by strong domestic demand, which has been fueled by the strong labor market. Key trading partners in terms of imports were Finland (13%), Germany and Lithuania (each 10%). Imports increased the most from Latvia, Germany and the US, driven by mineral products, transport equipment and electrical equipment, respectively. Meanwhile, imports from Russia decreased the most, driven by mineral products. Regarding commodity groups, the most considerable increase was marked by imports of agricultural products, chemicals and transport equipment.
Looking ahead, exports will likely continue to be negatively affected by moderating demand among trading partners, while lower investment demand due to uncertainties of the external environment will likely put downward pressure on imports. On the other hand, household consumption should continue to support import growth, which has been driven by the strong labour market.