April saw a reduction in Estonia’s activity in foreign markets

The flash estimate1 put the Estonian current account at 20 million euros in surplus in April 2015. Almost all the components in the current account were down, as exports and imports of goods and services and income from direct investment were less than in April last year. As the fall in imports was larger than that in exports however, the current account moved into surplus.

The sum total of the current and capital accounts was also positive in April. This means that the Estonian economy was a net lender to the rest of the world, so the country as a whole invested more resources abroad than it received from there.

Eesti Pank is publishing the flash estimate of the balance of payments monthly for the last month but one. From January 2015 Eesti Pank is accompanying the publication of the flash estimate with a short comment. The statistics on the second quarter of 2015 will be published with a comment on 8 September.

1 The quarterly balance of payments is compiled from a combined system of representative primary data sources, including surveys of companies, while the monthly balance of payments draws from a considerably smaller database. Although the monthly report uses as much data available for the month reported as possible, including administrative data sources and reports on international payments, it is subjective to a certain degree, which is why it is called an estimate. Once the quarterly balance of payments is released, the monthly balances of payments are adjusted accordingly.

Read more from Bank of Estonia website

Exports from Estonia amounted to 0.9 billion euros in February

According to Statistics Estonia, in February 2015, exports of goods decreased by 7% and imports by 4% compared to February of the previous year. The decrease in exports and imports was mostly influenced by a fall in the trade of mineral products and mechanical appliances.

In February, exports from Estonia amounted to 0.9 billion euros and imports to Estonia to 1 billion euros at current prices. The trade deficit was 141 million euros and it increased by 17 million euros compared to February 2014.

The biggest share in Estonia’s exports in February was held by electrical equipment (22% of Estonia’s total exports), followed by wood and products thereof (11%) and agricultural products and food preparations (10%). The decrease in exports compared to February 2014 was due to a significant decrease in the exports of mineral products (down by 34 million euros) and mechanical appliances (down by 11 million euros). The biggest increase occurred in the exports of wood and products thereof (up by 11 million euros) and electrical equipment (up by 6 million euros).

In February, the main commodities imported were electrical equipment (21% of Estonia’s total imports), agricultural products and food preparations (10%) and mineral products (10%). The drop in imports was influenced the most by a decrease in the imports of mineral products (down by 43 million euros) and mechanical appliances (down by 11 million euros). At the same time, the imports of electrical equipment increased (up by 44 million euros).

The top destination country of Estonia’s exports in February was Sweden (19% of Estonia’s total exports), followed by Finland (15%) and Latvia (10%). Electrical equipment and wood and products thereof were the main commodities exported to Sweden; electrical equipment and metals and products thereof were the main commodities exported to Finland; mineral products (incl. electricity) and agricultural products and food preparations were the main commodities exported to Latvia. The biggest decrease occurred in exports to Russia (down by 46 million euros), to Latvia (down by 15 million euros) and to Norway (down by 14 million euros). Exports to Russia were affected by a decrease in the exports of mechanical appliances (incl. bulldozers, excavators) and agricultural products and food preparations (incl. spirits, milk and dairy products, fish). Exports to Latvia fell mainly due to a decrease in the exports of mineral products (incl. motor spirits, electricity) and transport equipment (incl. motor cars). Exports to Norway decreased due to reduced exports of mineral products (incl. aromatic hydrocarbon mixtures) and miscellaneous manufactured articles (incl. prefabricated buildings). At the same time, there was a significant increase in exports to the Netherlands (up by 17 million euros) and Iran (up by 11 million euros). In the case of the Netherlands, the exports of mineral products (incl. oil shale) increased. In the case of Iran, there was a rise in the exports of agricultural products and food preparations (incl. barley).

The main countries of consignment in February were Finland (13% of Estonia’s total imports), Germany (10%) and Latvia (9%). The main commodities imported were electrical equipment and mineral products (incl. motor spirits, electricity) from Finland; mechanical appliances and transport equipment from Germany; and electrical equipment and agricultural products and food preparations from Latvia. The biggest decrease occurred in imports from Germany (down by 29 million euros) and Finland (down by 26 million euros). There were decreased imports of mineral products (incl. heavy oils) and mechanical appliances from Germany, and decreased imports of mineral products (incl. motor spirits and electricity) and transport equipment from Finland. At the same time, there was an increase in imports from China (up by 15 million euros) and Hungary (up by 13 million euros). The increased imports from China were mainly due to the growing imports of electrical equipment and textiles and products thereof, while the imports from Hungary grew mainly due to the increased imports of electrical equipment.

Read more from Statistics Estonia

The external balance improved last year

Growth in exports of goods and services was faster in the final months of last year than in the preceding quarters, though the developments were different for different groups of goods. So whereas exports of dairy products were around 30% smaller in the fourth quarter of last year than in the same quarter of the previous year for example, growth in exports of goods averaged around 3-4%. Growth was positive even though export prices fell by 3.7%. The growth in the export of goods was aided significantly by an increase in net re-exports. Exports of services also grew strongly in the final months of the year, mainly driven by maritime other transport services and construction services. The goods and services account was again in surplus in the last quarter of the year and the current account as a whole also moved into surplus.

The current account deficit in 2013 stood at 1.1% of GDP, but for 2014 as a whole it was very small, shrinking mainly because of increased exports of services. Growth in domestic demand was modest as companies reduced their investment activity for the second consecutive year, which held back growth in imports and so supported balance in the current account.

A current account that is close to balance means that substantial movement of capital in the financial account is not needed, as there is no need for additional funds from abroad to cover investment. The turnover of transactions, or the inflow and outflow of funds, was actually larger than in 2013 though, probably because of transactions made for liquidity management and financial investment. However, the increased inflow and outflow of funds did not significantly affect investment activity in the private sector last year. The Estonian economy was a net lender in 2014, as it had been in 2013 and by a similar amount, and by the end of the year, the net external debt stood at -9% of GDP.

This meant that the external balance of the Estonian economy improved last year in the figures for both the balance of payments and the international investment position.

 

Source: Bank of Estonia

Author: Andres Saarniit, Economist at Eesti Pank

Estonian Competitiveness Report 2015

Summary of the Estonian Competitiveness report published by the central bank of Estonia

• Estonian consumer price inflation was below average in 2014. Estonian price competitiveness strengthened in the markets of countries in the euro area, where Estonian relative prices fell, but it weakened in several other markets. Price-based competitiveness declined most in relation to Russia, while local inflation was not enough to compensate for the fall in the rouble, meaning that Estonian relative prices increased in the Russian market.

• The IMF methodology for the equilibrium current account position and the real exchange rate implies that the real exchange rate of the euro could be around 6% undervalued for Estonia, which should continue to favour opportunities for growth for Estonian exports.

• Products from different countries compete not only on price but also on other, qualitative, factors. Those European Union countries where prices and costs are rising faster than in other countries managed to increase export market share more.

• The share of Estonian exports of goods and services in global exports increased by a factor of 2.1 in current prices in 2000-2013 and by a factor of 1.5 at constant prices. The most recent data from 2013 show that the market share of Estonian exports was still increasing at current prices but had shrunk slightly at constant prices. This means that the value of Estonian exports only grew because of rises in relative prices.

• The role played by non-price factors in the growth of the market share of Estonian exports is shown by several expert analyses of export quality and complexity. The quality of Estonian exports has improved over the years, and relatively faster than in many other European Union countries. Improved quality allows prices to be raised without any threat to competitiveness.

• The complexity of exports also helps explain how relative growth in export prices shows only improvement in the qualities of export products. This indicates that Estonia is capable of achieving GDP growth that is better than average. Faster growth needs faster movement in the direction of more complex export products.

• Micro-level data show that the export premiums in the productivity and wages of Estonian exporters are large. The productivity of Estonian exporting companies is on average 25% higher than that of non-exporting companies and exporting companies pay 15% higher wages on average. These premiums have shrunk since the recession though.

Source: Eesti Pank

Read more from here

Imports were at the lowest level of the recent years in January

According to Statistics Estonia, in January 2015, exports from Estonia amounted to 920 million euros and imports to Estonia to 963 million euros at current prices. The previous time that imports were below a billion euros was in December 2011.

In January, exports of goods increased by 1% and imports decreased by 5% compared to January 2014. The trade deficit was 43 million euros and it decreased by 68 million euros compared to January 2014.

In January, the main commodities imported were electrical equipment (22% of Estonia’s total imports), mineral products (12%) and agricultural products and food preparations (10%). The drop in imports was influenced the most by a decrease in the imports of mineral products (down by 19 million euros), transport equipment and agricultural products and food preparations (both down by 18 million euros). At the same time, the imports of electrical equipment increased (up by 27 million euros).

The biggest share in Estonia’s exports in January was held by electrical equipment (a quarter of Estonia’s total exports), followed by mineral products (11%) and wood and products thereof (10%). The increase in exports compared to January 2014 was due to a significant increase in the exports of electrical equipment (up by 48 million euros) and mineral products (up by 7 million euros). The biggest decrease occurred in the exports of agricultural products and food preparations (down by 20 million euros) and mechanical appliances (down by 11 million euros).

The main countries of consignment in January were Finland (15% of Estonia’s total imports), Sweden (12%) and Germany (10%). The main commodities imported were mineral products and electrical equipment (from Finland), electrical and transport equipment (from Sweden) and mechanical appliances and transport equipment (from Germany).The biggest decrease occurred in imports from Finland (down by 30 million euros) and Germany (down by 29 million euros). At the same time, imports from Poland and Russia increased (both up by 12 million euros).

The top destination country of Estonia’s exports in January 2015 was Sweden (21% of Estonia’s total exports), followed by Finland (14%) and Latvia (11%). Electrical equipment and wood and products thereof were the main commodities exported to Sweden; electrical equipment and metals and products thereof were the main commodities exported to Finland; mineral products (incl. electricity) and agricultural products and food preparations were the main commodities exported to Latvia. The biggest increase occurred in exports to Sweden (up by 29 million euros) and the USA (up by 15 million euros). There was also a significant decrease in exports to Russia (down by 53 million euros) and Finland (down by 14 million euros).

In January compared to December 2014, exports stayed at the same level but imports decreased by 14%.

Diagram: Estonia's foreign trade by month

Read more from Statistics Estonia

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

NASA uses Estonian-founded GrabCAD

The National Aeronautics and Space Administration (NASA), the US government agency responsible for the civilian space program as well as aeronautics and aerospace research, is using the Estonian-founded, US-based, online engineering platform GrabCAD to design a handrail clamp assembly (HCA) for the International Space Station (ISS) that can be printed on the ISS 3D printer.

Called NASA Handrail Clamp Assembly Challenge, the aim is to find the best design for a rigid clamp that is used by astronauts on the ISS. The handrail clamp is used by astronauts in a microgravity environment to mount various things.

The HCA design will be printed by the 3D printer on-board ISS and will be named CHAMP (Clamp for Handrail with Additively Manufactured Parts).

NASA is using the GrabCAD community of designers and engineers to find a new design.

Founded in 2010, GrabCAD helps engineers get products to market faster by connecting people, content and technology. The firm offers GrabCAD Workbench, a cloud-based collaboration tool that enables engineers and designers to share, view and manage CAD files and other design data. GrabCAD is also home to a community of more than 1.6 million members from around the world, who can access a large public CAD file library, as well as connect with other engineers.

GrabCAD was recently acquired by the US-Israeli provider of 3D printing solutions, Stratasys Ltd, for around 100 million dollars.

The NASA challenge will be open for submission until February 16 and winners will be announced on month later

Source: ERR News via Estonian Review

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