Eurozone debt crisis has started to tangibly affect Estonia - analysts

Photo: Mihkel Maripuu

The eurozone, affected by a recession, has started to tangibly influence the Estonian economy and there's no reason to expect the outlooks for export to improve in the coming few months, analysts at LHV Pank and Nordea Pank said in their comments on February export figures.

"While you can't draw fundamental conclusions based on data for one month, particularly a month as short as February, it has to be admitted on the basis of data for the three latest months that the eurozone, which is experiencing a recession, has started to tangibly affect the Estonian economy," Heido Vitsur, economist at LHV Pank, told BNS.

"If until November last year Estonia's exports grew at an altogether satisfactory rate, then the average export growth rate of 3 percent in the last three months and a 2 percent decline in February, combined with figures about industrial output growth, speak of more difficult times," Vitsur said.

Vitsur warned against early conclusions however, pointing at the big differences in the size of foreign trade in the three months. The volume of trade in January was unprecedented, whereas in December and February it was relatively modest, he said.

"Second, because in February the biggest decline was recorded in the group of goods that is the most volatile by nature -- that of mineral fuels, including electric energy. However, a more direct indicator of the deterioration of the competitive position of our exporters than fluctuations of a few percent in volumes is the fact that while export prices were somewhat lower [in February] than in February a year ago, on the domestic market all inputs tend to become constantly more expensive," Vitsur said. "Unfortunately, in a situation like this there are no grounds whatsoever to expect outlooks for export to improve in the coming few months, rather the other way round," he added.

"It's the external environment that influences the bigger picture of course. If we look at what is going on in the euro area economy, a weak hope persists that a slight improvement will happen in the stronger countries toward the end of the year after all," Nordea Pank chief economist Tõnu Palm told BNS.

"We're still in the stranglehold of a low feeling of security and we need loan growth as well. At the same time, some branches of the economy with global reach, which are capable of exporting to the more rapidly growing bigger markets such as Asia, but also the USA, have definitely reason to be more optimistic today than markets on the average," Palm said.

Estonian manufacturing companies' assessments of their outlooks and export orders have been better in the past month than in the two preceding months. "If we compare this with our neighbors in Finland, then also their companies' assessments of the outlook of production have improved in the complex external environment. At the same time, the assessments of Finns concerning orders, including export orders, have declined once again in March," Palm said.

Exports of goods from Estonia in February declined 2 percent from the same month a year ago while imports were down 3 percent, measured in current prices. The fall in exports and imports was largely the result of a significant decrease in trade in mineral fuels, Statistics Estonia said on Tuesday.