Merchandise trade deficit widens by 11.3% y/y in Estonia

The merchandise trade deficit widened by 11.3% y/y to EUR226.7m in December, according to figures of the statistical office, published on Monday. Export growth slowed down tangibly from 18.5% y/y in November to 6.0% y/y in December, signaling for moderating demand among Estonia’s trading partners. Meanwhile, import growth also decelerated significantly from 15.9% y/y in November to 6.9% y/y in December.

In cumulative terms, the merchandise trade deficit narrowed slightly by 3.7% y/y to EUR1.8m in 2018, compared to a deficit of EUR1.9m in 2017. In 2018, Estonia’s most important trading partners in terms of exports were Finland (16% of Estonia’s total), Sweden (11%) and Latvia (10%). The most notable increase occurred in exports to the USA, Singapore and Finland. The biggest decrease occurred in exports to Sweden, the Netherlands and Russia. As to commodity groups, the greatest increase was in the exports of mineral products, wood and articles of wood, and electrical equipment.

The key partners regarding imports were Finland (13% of Estonia’s total), Germany and Lithuania (10% each). The most tangible increase occurred in imports from Russia (higher by EUR484m), Belarus and Lithuania, with the largest increase in the imports of mineral products. At the same time, imports decreased the most from Poland and the Netherlands. The main commodities imported to Estonia were mineral products, electrical equipment and mechanical appliances, transport equipment, and agricultural products and food preparations.

Looking ahead, we expect that Estonia’s external trade balance is likely to deteriorate in 2019, considering expectations about easing demand amid growth slowdown in Europe, while imports are expected to still remain relatively solid, fueled by strong demand, partially driven by labor market developments.

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