Merchandise trade deficit in Estonia widens to EUR430.3m in January

The merchandise trade deficit widened to EUR430.3m in January from EUR155.2m a year ago, according to data published by the stat office on Thursday. Imports rose by 39.7% y/y, mostly on the back of the imports of vehicles which tripled. We believe that the increase of vehicle imports was a one-off event and they will decline in the months to come. Imports of mineral, chemical products and base metals rose significantly likely due to expectations for further solid increase of industrial output. Food imports went up by 10.1% y/y, affected by the weak crop yield and higher re-export. On the other hand, machinery imports dropped by 4.0% y/y, suggesting that investment activity has not recovered. The main import trade partners were Finland (27% of total imports), followed by Lithuania (10%), Germany (8%) and Russia (8%). Looking ahead, we expect imports to continue to increase on the back of still solid private consumption and reviving investment activity.

Exports rose by 13.7% y/y with the biggest contribution coming from exports of mineral products and base metals, which increased by 63.5% y/y and 54.4% y/y, respectively. Moreover, exports of wood and chemical products also reported significant growth, likely underpinned by recovering demand Finland and Russia, exports for which went up by 12% y/y and 34% y/y, respectively. The main export destinations were Finland (15% of total exports), Sweden (15%) and Latvia (9%). Considering that the economic activity in key export partners is projected to strengthen, we believe that exports will continue to rise noticeably.

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