More complex exports help lead to faster growth

Exports of Estonian goods and services grew faster in 2000-2013 than global exports as a whole in both current and constant prices, meaning that Estonian exports managed to gain market share during those years.

Estonian price competitiveness strengthened in the markets of many countries, where Estonian exporters gained a slight advantage in trading from the depreciation of the euro or from prices rising less quickly. In some other markets, notably Russia, exporting became more difficult.

Estonian products compete not only on price but also more and more successfully on other, qualitative, factors. The movement up the quality ladder allowed a reduction in the share of competitiveness that was price-based, as Estonia moved in 2005-2011 from low-quality products towards medium-quality ones, while the number of high-quality products clearly increased. As a relatively poor country, Estonia can compete in markets for comparatively complex export products, so in 2011 Estonian productivity was 37% of that in Germany at current prices, but the indicator for complexity of exports stood at 78%. This should leave the Estonian economy relatively well placed to grow faster than the average for the European Union.

A study using detailed corporate data has shown that Estonian manufacturing companies that export are on average 25% more productive than non-exporters, pay 15% higher wages and have 50% more employees. The productivity of exporters is high because more productive companies are more likely to enter foreign markets. Productivity has also improved as a result of exports because of economies of scale and lessons learned in export markets.

Source: Bank of Estonia

Author: Natalja Viilmann and Jaanika Meriküll; Eesti Pank Economists

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