Merchandise trade surplus widens to EUR99.5m in Estonia

The merchandise trade surplus widened to EUR99.5m in September from EUR76.8m a year ago, data of the stat office showed on Thursday. This reflected 1.2% y/y decline of exports, the main contribution for which came from 10.1% y/y contraction of machinery exports. Moreover, there was strong decline in exports of foodstuff (down by 9.7% y/y) and mineral products (17.7% y/y). On the other hand, exports of base metals, chemical and wood products registered double-digit growth rates, likely boosted by the higher commodity prices. In regards to the export destinations, the overall decrease came largely on the back of lower exports to Sweden (down by 8% y/y) and Latvia (down by 9% y/y). On the other hand, exports to Finland rose by 7% y/y and the country remained the top destination for Estonian exports with exports for it representing 17% of total exports. Moreover, there was noticeable increase of exports to Germany (up by 19% y/y) and Russia (up by 6% y/y). Looking ahead, we believe that exports will turn back to growth in the next months, supported by lower base and further increase of demand for Estonian exports, underpinned by increasing economic activity in the neighboring countries.

Imports rose by 0.8% y/y, following 11.2% y/y increase in the month before. Imports of machinery declined by 2.9% y/y, suggesting that the growth of investments is starting to slow down. Moreover, imports of foodstuff fell by 1.3% y/y likely affected by lower re-exports. On the other hand, some strong expansion was registered by imports of mineral products, wood and base metals.

As far as the cumulative figures are concerned, the merchandise trade deficit reached EUR1.5bn (6.6% of GDP) in Jan-Sep, compared to EUR1.2bn (5.9% of GDP) in the corresponding period last year. Imports increased by 9.4% y/y, boosted by the strong growth of investment activity in H1. At the same time, exports went up by 7.8% y/y, aided by the strengthening external demand. In regards to Q3, the merchandise trade deficit came in at EUR390.1m compared to EUR439m in Q2. Considering the strong inflow of foreign tourists, we believe the services exports increased noticeably, boosted by Estonia’s EU presidency. Thus, we believe that net exports’ positive impact to GDP growth rose somewhat in Q3. However, this was likely offset by the deceleration of GCF growth during the quarter. Taking into account that retail sales data indicated that household consumption growth slowed down in Q3, we believe that GDP growth eased noticeably during the period, after quickening to 5.7% y/y in Q2.

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