OVERVIEW OF ECONOMY 2017 - Tallinn 2018 - Majandus- ja ...
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OVERVIEW OF ECONOMY 2017
Tallinn 2018Contents Macroeconomic situation ............................................................................................................................ 3 Foreign trade ................................................................................................................................................. 8 Manufacturing industry .............................................................................................................................. 15 Manufacture of food products and beverages ......................................................................................... 18 Manufacture of textiles .............................................................................................................................. 23 Manufacture of wearing apparel ................................................................................................................ 25 Wood processing ........................................................................................................................................ 27 Manufacture of pulp, paper and paper products ...................................................................................... 30 Chemical industry ....................................................................................................................................... 33 Manufacture of rubber and plastic products ............................................................................................ 36 Manufacture of metal and metal products ............................................................................................... 38 Manufacture of machinery and equipment .............................................................................................. 40 Manufacture of electronic and electrical equipment ............................................................................... 42 Manufacture of means of transport .......................................................................................................... 45 Manufacture of furniture ............................................................................................................................ 47 The construction sector ............................................................................................................................. 49 Domestic trade ............................................................................................................................................ 53 Tourism ........................................................................................................................................................ 56 Information and communication ............................................................................................................... 62 Transport ..................................................................................................................................................... 66 Annexes ....................................................................................................................................................... 70 Abbreviations in text: y-o-y – year-over-year no – number l.s. – left scale r.s. – right scale * – preliminary, short term statistics
Overview of economy 2017 3
Macroeconomic situation
% y-o-y Economic growth
In 2017, the Estonian economic growth gave 20
analysts a positive surprise for a change,
speeding up to 4.9%. Considering the average 10
2% increase of GDP of the previous four years, 0
the forecasts had assessed Estonia’s growth
options as significantly lower and also curbed -10
our growth potential. One reason was weak
-20
foreign demand, which would not be restored
2001 2003 2005 2007 2009 2011 2013 2015 2017
year after year but which was crucial for
European Union
speeding up Estonia’s growth as domestic Source: Statistics Estonia Estonia
demand remained low due to the local private % y-o-y Domestic demand
sector remaining cautious. In 2017, the 50
acceleration of foreign demand1 exceeded all 40
30
expectations, reaching 6% (the average of the 20
previous five years was 2%). Estonian 10
0
economic growth was rather extensive across -10
areas of activity, the biggest contribution came -20
from construction and several fields of service -30
-40
directed towards domestic consumption.
2001 2003 2005 2007 2009 2011 2013 2015 2017
Exporting processing industry also did well,
Private demand
manufacture of wood and metal products as
Investments
well as trailer manufacture grew quickly. Source: Statistics Estonia
Growth was restored in energy industry and
transport and storage. Favourable global Domestic demand grew faster in 2017, but its
conjuncture and the significant acceleration of proportion in the GDP remained (96.9%) in the
growth in Finland gave good opportunities to background of the strong economic growth.
realize the Estonian economic potential in The restoration of inflation steeply slowed the
2017. growth of private consumption, but the growth
of investments (total capital placement) turned
into a clear increase after three years in
decline. The low level of domestic demand to
gross production still indicates a high level of
caution in the behaviour of local consumers
and investors, which is the legacy of a deep and
long-lasting global economic crisis.
Despite the increase of growth of residents’
income, the growth of their purchasing power
slowed down in 2017, also being expressed in
the growth speed of private consumption
slowing to 2.1% from the 4.3% of the previous
year. The sense of security of households
improved over the year as the demand for
employees grew over the year. However, the
increase of consumer prices accelerated to
3.4%, which made it complicated to preserve
1
Weighted growth of import of Estonia’s
primary export partners.
Ministry of Economic Affairs and Communications Ministry of Finance 20184 Overview of economy 2017
the growth speed of consumption. In a well as local elections. The growth of over 20%
favourable economic conjuncture, it would increased labour shortage in construction and
have been possible to wait until the saving rate increased supply prices, even though the
of residents decreases in order to compensate quickly growing demand did not yet reflect in
for increasing prices more extensively, but that the construction price index. However,
did not happen. Curiously, residents have even business indicators showed at the end of the
increased their rate of savings2 a little in the year that the burst of demand was temporary
past five years and it has almost reached the and the role of the government will continue to
heights of the crisis of 2009. be moderate on the construction market in the
coming years.
On the background of increasing saving, the
investments of residents in new residential real The foreign environment was advantageous in
estate continued at a similar speed as in the 2017, characterized by the acceleration of the
previous year. According to the Land Board, economic growth of the Euro zone and the
new residential space was bought primary trade partners, as well as acceleration
approximately 15% more compared to the of import demand. This allowed Estonian
previous year. The growth of turnover of companies to increase export volumes and
residential loans slightly exceeded the growth increase prices. Export of goods and services
of volume of residents’ residential increased by 2.9% and export prices grew by
transactions, i.e. the proportion of loans in 4.1%. Growth of export was lower than foreign
financing transactions increased slightly, but demand, but this was caused by the decrease
still remained two times lower than before the of foreign orders by one company of mobile
crisis. In other words, people remain communication devices. Export of this area of
conservative in their financial behaviour on the activity has low value added, but a significant
real estate market. impact on foreign trade volume. When looking
at export without mobile communication
After three years of decrease, the investments
devices, the growth of Estonian export was
in the entrepreneurial sector turned towards a
faster than foreign demand, i.e. the market
strong growth in 2017. The greatest
share of export increased on foreign markets.
contribution to the growth came from buildings
and facilities, but capital investments in means Out of Estonian-made goods, growth was
of transport and machinery and equipment spearheaded by the increase of export volumes
also grew quickly. By areas of activity, the of shale oil, wooden products and buildings,
picture was influenced the most by real estate metal products, and machinery and equipment.
activities, the processing industry, and Growth of export of goods was hindered
transport and storage. In the processing strongly by the decrease of export turnover of
industry, investments increased the most in mobile communication devices by a quarter.
the field of producing wooden products, where Out of the more important markets, export was
demand has been high for several years on the most increased to the Netherlands (+44%),
domestic as well as foreign market. Hopefully, Germany (+25%), Latvia (+17%) and Finland. In
the recession of economic lethargy in the addition, the geography of export has
foreign environment will also promote the expanded and bigger growth numbers can be
growth of corporate investments in other seen at many of the target markets of a
fields. previously smaller share. Due to the restoration
of export of transport services and the
In 2017, the government sector contributed a
continued successful sale of IT services to
lot particularly to investments in the field of
foreign markets, the growth of export of
construction, caused by the use of EU funds as
the definition of the Statistics Board, which
2
Here, saving rate is defined as the proportion
contains all income components, but the
of private consumption expenses in wage
Statistics Board will only publish the saving
income and social transfers. This differs from
rate of 2017 in September 2018.
Ministry of Economic Affairs and Communications Ministry of Finance 2018Overview of economy 2017 5
services accelerated to 6.2%. The import of % y-o-y Consumer price index
12
goods and services increased by 3.5% thanks
to the stronger import of intermediate 9
consumer goods and capital goods due to 6
increased investing activities. 3
In 2017, the surplus of current accounts was 0
the biggest of all time, reaching 3.2% of the -3
GDP. This is due to strong export of services 2001 2003 2005 2007 2009 2011 2013 2015 2017
and an accelerated receipt of current transfers Consumer price index: Estonia
of foreign aid recorded in the balance sheet of Consumer price index: Euro zone (MUICP)
secondary income. Even though investment Source: Statistics Estonia, Eurostat
activities increased, this did not result in the
thousand Employment and unemployment %
degeneration of trade exchange balance. 80 22
2017 was characterized by the enlivened world 50 18
economy which resulted in the restoration of
20 14
inflation pressure due to increased prices of
raw materials here as well as in the Euro zone -10 10
at large. In addition to foreign factors, our price -40 6
level was also raised by additional tax
-70 2
measures. Due to increased economic activity, 2002 2004 2006 2008 2010 2012 2014 2016
strong labour market and the transfer of Change of number of employed
increased prices of raw materials, the price Unemployment rate (r.s.)
growth of services was also restored. The Source: Statistics Estonia
growth of oil prices was caused by oil
The number of employed people increased by
production limiting agreements by OPEC and
2.2% over the year and unemployment dropped
the increased oil demand due to the
to 5.8% according to the labour survey. Other
accelerating growth of world economy. The
sources confirm a similar, if less positive
appreciation of food products contributed the
development. According to the Tax Board, the
most to inflation. Food prices increased by
number of salaried workers increased by 1.7%.
5.7%, mostly due to appreciation of raw
The number of registered unemployed persons
produce on foreign markets. Expense
increased by 0.2% compared to the year before,
pressures of manufacturers and traders as well
reaching 4.7%, but the increase was mostly
as the increased demand of our export markets
caused by the increase of registering persons
also played a part. The appreciated food
incapable of work as unemployed at the
formed 1.3 percentage points, or more than a
Unemployment Insurance Fund. The growth of
third of the inflation of 2017. In line with foreign
employment was rather extensive and the
markets, the prices of dairy and oil products
number of employees grew in most areas of
increased to a large degree. Inflation
activity. According to the Tax Board,
accelerated to 3.4% across the year. Indirect
employment increased the most in the
taxes increased inflation by 0.9%, nearly half of
processing industry, which has recovered
which was the increase of alcohol excise duty
thanks to increased domestic demand, as well
rate.
as in construction. Out of bigger areas of
activity, the number of employed persons
decreased in the transport sector and retail.
Labour shortage has become one of the most
significant factors impeding business growth,
alongside insufficient demand. Despite the
increasing wage pressure, the plan is to
increase the number of employees further,
allowing to predict the continued positive
Ministry of Economic Affairs and Communications Ministry of Finance 20186 Overview of economy 2017
development of the labour market during accelerated investment activities. The result of
upcoming quarters. In the long run, the desire social insurance funds exceeded expectations
of companies to hire extra help is limited by the in the Health Insurance Fund as well as the
decrease of working-age population, forcing Unemployment Insurance Fund, caused by
companies to reorganize their production. good collection of social and unemployment
insurance taxes. The structural budgetary
According to the Statistics Board, the average
position of the government sector was in a
gross monthly salary grew by 6.5% in 2017,
deficit of 0.3% of the GDP in 2017. The budget
accelerating together with the increased
surplus of 2018 will reach 0.2% of the GDP,
economic activity throughout the year. The
taking into account the decisions concerning
wage growth exceeded the speed of price
budget strategy, which is higher by 0.4
growth by 3% in 2017, which can be considered
percentage points compared to the
moderate. Wages increased in all areas of
expectation of the state budget. The
activity. Across the year, wages grew faster
improvement can be seen in nearly all levels of
than average in the mining industry (11.1%)
the government sector – the increased
and in information and communications
forecast of labour taxes improves the
(10.2%). In the mining industry, the wage level
consolidated position of social insurance
was restored after the difficulties of 2016 due
funds and local governments. The position of
to low oil prices, but this area of activity was
the central government are improved by
also influenced by the increased activity of the
decreased state budget expenses on the social
construction market. The area of activity of
sector and the increased tax prognosis, where
information and communications have shown
the better collection of labour taxes exceeds
very good sales results in recent years, also
the decreased excise duty prognosis. The
expressed in the wages paid. As information
budget surplus of 2019 will increase to 0.5% of
and communications are very labour-heavy,
the GDP due to measures adopted in the
the premature growth of wages before profits
budget strategy. In later years, the surplus will
has not worsened their competitive status. The
begin to decrease due to the objective of
growth of wages was in line with the economic
structural balance established and the
growth in 2017 and profit grew faster than
economy heading towards its potential
wages in nearly all areas of activity. This is
plateau.
aided by increased demand and moderate
price growth, which have first and foremost The tax burden of 2017 turned out to be 33.6%
improved the profitability of companies. The of the GDP, which was 0.8% lower than the year
situation only worsened in wholesale and retail, before. The tax burden was decreased by the
where there is a shortage of labour due to low collection of excise duty, which remained
wages and heavy competition forces wages to below the predicted level. Tax burden was also
go up before profits. decreased by receipt of direct taxes (mainly
corporate income tax), the growth of which
In 2017, the budget of the government sector3
remained below the increase of GDP.
was in a deficit forming 66 m euros or 0.3% of
According to the state budget strategy, the tax
the GDP according to the preliminary data of
burden of 2018 will be 34.3% of the GDP, which
the Statistics Board. Lacking were the central
is on the same level as the previous prognosis.
government (0.3% of the GDP) and local
The tax burden was decreased by the upwards
governments (0.3% of the GDP), partly
adjustment of the GDP level, balanced by the
counterbalanced by the surplus of social
increase of labour tax prognosis. In the period
insurance funds (0.3% of the GDP). The deficit
2019–2022, tax collection will be reduced by
of the central government as well as local
the lack of increased alcohol excise duty, at the
governments was largely caused by quickly
same time salary increase and several other
3
(e.g. hospitals), state companies (e.g. RKAS), local
The government sector includes: the central
governments, the Health Insurance Fund, the
government (reflected in the state budget),
Unemployment Insurance Fund.
institutions under public law, state foundations
Ministry of Economic Affairs and Communications Ministry of Finance 2018Overview of economy 2017 7
measures of budget strategy will increase the
receipt of labour taxes as well as income tax.
The greater distribution of public company
dividends will increase the collection of
corporate income tax. On the whole, tax burden
will increase to 34.6% of the GDP in 2019 and
decrease to 34.2% by 2022.
The government sector debt burden fell to 9%
of the GDP by the end of 2017, and without the
impact of the European Financial Stability
Fund, to 7% of the GDP. In 2018, the
government sector debt burden will decrease
to 8.5% of the GDP. However, the debt will
nominally increase, due to the increased
contribution of companies under public law
and foundations involved in the central
government, whereas the debt burden of local
governments will decrease compared to 2017.
According to the forecast, the debt burden is
expected to decrease gradually in the
upcoming years, eventually reaching 5.3% of
the GDP in 2022 as the end of the forecast
period.
% 2017 2018* 2019* 2020* 2021* 2022*
Growth of real GDP 4,9 4,0 3,2 3,0 2,9 2,9
Growth of nominal GDP 9,0 7,6 6,3 5,8 5,4 5,4
GDP in current prices (bn €) 23,0 24,7 26,3 27,8 29,3 30,9
Change of consumer price index 3,4 2,9 2,3 2,4 2,0 2,0
Employment
658,6 664,0 667,1 667,1 665,1 663,1
(15–74-year-old, thousands)
Growth of employment 2,2 0,8 0,5 0,0 –0,3 –0,3
Unemployment rate 5,8 5,8 6,2 6,3 6,5 6,8
Average monthly wage (€) 1221 1307 1381 1457 1540 1628
Real growth of average monthly
3,0 4,0 3,3 3,0 3,6 3,7
wage
Nominal growth of average
6,5 7,0 5,7 5,5 5,7 5,7
monthly wage
Current account (% of GDP) 3,2 3,2 3,2 2,9 2,4 2,0
Change in private consumption
2,0 4,7 3,3 3,0 2,7 2,7
expenditure
Change in gross fixed capital
13,1 3,3 5,1 4,3 3,9 3,7
formation
Change of domestic demand 4,2 3,9 3,1 3,0 2,9 2,8
Change of exports of goods and
2,9 4,5 4,2 4,0 3,8 3,8
services
Change of imports of goods and
3,5 4,6 4,3 4,2 4,0 3,9
services
Ministry of Economic Affairs and Communications Ministry of Finance 20188 Overview of economy 2017
Foreign trade
In 2017, Estonian trade was at a record high. they are used to produce exported goods. In
World trading became active again and 2016, import as well as export developments
economic development accelerated, resulting were positive. Goods were primarily imported
in an 8% growth of Estonian trade turnover. from Finland, Germany and Lithuania, but
Export of goods increased also by 8% import from the Netherlands grew the most,
compared to the previous year, reaching 12.8 increasing by 18% compared to the previous
bn euros, and import value reached 14.7 bn year. The import of means of transport as well
euros, growing by 9% over the year. Foreign as textile and textile products grew the most
trade balance, however, remains in the over the year. However, electrical appliances
negative. The growth of trade turnover was were imported to Estonia the most, the share of
also influenced by export and import prices, which in total import was 8%. The shares of
growing respectively by 5.5% and 4.5% over the export and import in total trade did not change
year. over the year compared to the previous year,
remaining at the same level of 47% and 53%,
Despite political uncertainties, the economy of respectively.
the Euro zone was on the rise in 2017. The
The negative balance of foreign trade grew
economic growth strengthened in the Euro
together with the increased total volume of
zone across countries as well as areas of
trade. In 2017, trade deficit was 16% higher
economy. The growth of Estonian trade is
than in 2016. The growth of trade deficit was
largely due to positive changes in EU economy,
most influenced by import of means of
but even more directly thanks to favourable
transport (incl. ships), the negative balance of
developments in the economies of Estonia’s
which grew by 44% over the year, reaching 1 bn
primary trade partners. The better outlook of
euros. The main reason was Tallink purchasing
global economy is also reflected in Estonian
a new ship. Big negative balances also
export. The growth of export demand
appeared in the trade of chemical products (–
significantly increased the growth of import
0.59 bn euros), mechanical machinery (–0.4 bn
because due to Estonia’s small size, a lot of
euros), rubber and plastic products (–0.38 bn
raw goods and materials are imported. The
euros) and pre-made food products (–0.34 bn
trade deficit was 1.9 bn euros in 2017,
euros). Greater surplus was in the trade of
increasing by 263 m euros compared to 2016.
wood and wooden products (0.9 bn euros) and
Over a half of the total trade volume comes various industrial products such as furniture,
from trade with five of the largest partners. In pillows, blankets and wooden houses (0.77 bn
2017, the trade turnover increased with four of euros). Greater deficits across countries came
them. Out of the foreign trade partners with the from trade with Poland, Germany and
greatest volume, turnover only decreased with Lithuania. The greatest surplus was in trade
Sweden. In 2017, trade with Finland grew by with Sweden, the positive balance of which
13%, with Germany by 15%, with Latvia by 9% was 0.45 bn euros. Out of the main trade
and with Lithuania by 7%. Trade with Russia, partners, Estonia also had a positive trade
which had been in a long decline, also turned balance with Finland and Russia, but the trade
towards a rise again, growing by 22% over the surplus with those countries was only a few
year. In 2017, trade with EU countries million euros. There is also a positive foreign
increased the most – export grew by 18% and trade balance with countries outside the EU.
import by 11%. In trade with EU countries,
export grew by 4% and import by 9% over the
year. However, trade with EU countries
continues to form over a third of the total
Estonian trade.
A large part of goods imported into Estonia is
manufacturing input for industries, meaning
Ministry of Economic Affairs and Communications Ministry of Finance 2018Overview of economy 2017 9
% y-o-y Export and import growth prices. Big growths of import prices also
40 occurred in chemical product manufacture,
30
20 metal manufacture, plant growing and animal
10 husbandry, and food production.
0
-10 According to forecasts, the growth of average
-20 import demand of Estonia’s bigger trading
-30
-40 partners will also continue in 2018. This should
offer more export opportunities to Estonian
Nominal export growth Nominal import growth companies. The prognosis of the Estonian
Source: Statistics Estonia Institute of Economic Research as of March
billion € Trade dynamics 2018 indicated positive development
15 expectations for foreign trade by experts. As
10 for the future development of the trade
5 balance, the prevailing opinion was that the
0 moderately negative balance may increase.
-5
-10 Export
-15 In 2017, export of goods grew by 8% thanks to
the growth of global economic activity. Growth
Exports Imports Balance
Source: Statistics Estonia
occurred in every month of 2017 except April,
where export volume decreased by 2%. The
decline of April was largely caused by
Trade dynamics are closely related to changes
decreased export of electrical appliances.
in price indexes. In 2017, Estonian trade was
Export grew the most in May, January and
characterized by foreign price pressure,
March, growing by 15% and 14% in January and
increasing both the prices of export and import.
March respectively compared to the previous
As a positive development, the growth of
year. Export grew by 0.96 bn euros across the
export prices was faster than the growth of
year.
import prices, facilitating the growth of
corporate export turnover, which in turn had a The export of most commodity groups grew in
positive impact on the improvement of 2017. The growth of export was most
profitability and supported investments. The influenced by the export of mineral products,
growth of export prices began in the second metal and metal products, means of transport,
half of 2016 and continued for the entirety of and chemical products. One circumstance
2017. Over the year, export prices grew by 5.5%. supporting the growth of trade was the growth
The growth of import prices began somewhat of raw material prices, increasing the export of
later, but the growth also remained present for mineral products by 36% in 2017 in comparison
the entire 2017. However, the growth of import with 2016, and the export of chemical products
prices remained 1% less than the growth of by 20%. Out of goods of Estonian origin, the
export prices, or 4.5%. The price growth export of mineral products also grew the most,
continued thanks to increasing demand and growing more than twice over the year. In
the prices of crude oil and other raw products, addition, there was a significant increase in the
which are on the increase. export of metal and metal products (+22%) and
wood and wooden products (+14%) of Estonian
As export prices grew faster than import prices,
origin. The total export of goods of Estonian
the trade prospects of companies were good,
origin grew by 7% in 2017, but their share in
i.e. purchased goods could be bought cheaper
total export remained on the level of 2016, i.e.
while sale prices grew faster. Of course, the
at 72%. Out of the most important commodity
situation varied a lot across areas of activity.
groups, export decreased in the group of
During 2017, export prices of oil products grew
machinery and equipment (–5%). The
the most, and there was also a sizable rise in
commodity group of machinery and equipment
plant growing and animal husbandry. Oil
consists of two larger parts – mechanical
products also saw the greatest rise in import
Ministry of Economic Affairs and Communications Ministry of Finance 201810 Overview of economy 2017
machinery and equipment, and electrical means of transport is means of land transport,
machinery and equipment. The decline of forming over a third of total export of means of
export in 2017 was caused by the decrease of transport. However, export of vehicles and
export of electrical machinery and equipment. other means of transport generally constitute
However, the export of mechanical machinery transit trade. In addition, the sale of two ships
and equipment was on the increase. The export by the subsidiary of Tallinn had a positive
of electrical appliances was 14% less than the impact on export of means of transport. The
year before, the main cause of the decline was biggest export partners for chemical products
the decrease of volume on the Swedish market, is Russia, with whom the export volume of the
which is the most important target market for commodity group grew by 11%. Foreign
electrical equipment. Mobile communications demand grew the most in France, Belgium and
equipment formed the biggest share in the Spain. The greatest growth of export of
group, the export volume of which to Sweden chemical products occurred in export of
dropped by 45% over the year. The total export fertilizers, which nearly doubled over the year.
of mobile communications equipment fell by The export of the most important commodity
25% in 2017. In addition, the export of group by share, including paints, mastics,
transformers as a significant part of the sealants etc. was 8% higher in 2017 than the
commodity group decreased by 11% and the year before.
export of cables decreased by 34%. In addition
In summary, the export of only a few
to Sweden, the bigger export partners for
commodity groups was in a decline. The
electrical equipment are Finland and Germany,
greatest negative changes occurred in export
where export volumes increased in 2017.
of precious metals, the share of which in total
Export to Finland grew by 6% over the year and
export forms only 0.8%. The most important
export to Germany doubled.
positive changes occurred in export of mineral
The commodity group that saw the greatest products.
growth in 2017 was export of mineral products.
In 2017, the share of the European Union in
The primary target markets for export of
Estonian total export dropped to 71%, which
mineral products are the Netherlands, Latvia
was 3 percentage points less than the year
and the USA, all of which saw a growth in 2017.
before, but the export volume increased by 4%.
Export to the Netherlands grew more than
The export of Estonian entrepreneurs to the
twice, Latvia by 4% and the USA by 44%. The
domestic EU market was 9.2 bn euros. Out of
growth was largely caused by increased export
the most important partners of the joint
of mineral oils. The growth of export was also
internal market, export grew fastest in
spearheaded by wood and wooden products
Germany (+34%) and the Netherlands (+44%).
(+14%), metals and metal products (+22%),
means of transport (+22%) and the chemical Export to CIS countries was in decline for a
industry (+20%). The biggest export partners long time, but began to grow again in 2016. The
for wooden products are Sweden, Denmark, growth continued in 2017 and export volumes
Finland and Germany, all of which saw a were 20% higher than the year before. This was
growth in 2017. The greatest part of export of most impacted by export to Russia, forming
wooden products was formed by sawn over 90% of all export to CIS countries. Export
materials, wooden carpentry products and volumes to Russia grew by 21%. Export to
firewood, which were shipped the most to Belarus saw the same amount of growth, the
Nordic countries. In addition, the growth export share of which in total export to CIS countries
of wooden products was facilitated by a record was 6%. The increase of export volumes to
amount exported to China in 2017. The biggest Russia can be associated with the restoration
export partners of metal and metal products of the currency exchange rate of the rouble
are Latvia, Lithuania, Finland, and Germany; the from April onwards, and the increase of oil
growth of 2017 was spearheaded by the price.
growth of export of iron and steel scraps to There was a small decline on markets of
Germany, and export of iron or steel structures NAFTA countries in 2017, export volumes were
to Russia. The main commodity group of 3% less than in 2016. The main cause for the
Ministry of Economic Affairs and Communications Ministry of Finance 2018Overview of economy 2017 11
decline was the particularly high base level of
Exports target countries
Mexico in the previous year, resulting in a 48%
decline in 2017. Export volumes to Mexico in Finland
2017 were comparable to the period 2012– Sweden
2014. The USA holds the highest share of
Latvia
NAFTA countries, export there grew by 18% and
the main cause was the increase of oil prices. Germany
In addition, export to Canada grew by 12%. This
Russia
was mainly caused by increased demand for
machinery and equipment. Lithuania
%
Sweden has been Estonia’s main export 0 3 6 9 12 15 18 21
partner since the economic crisis, but trade 2017 2016
volumes with Sweden dropped so much in Source: Statistics Estonia
2017 that Finland became Estonia’s most
Germany rose to the fourth place of the ranking
important trade partner. However, the share of
list of Estonian target markets for export,
the Finnish market remained on the same level
forming 7% of all export. Germany is also one
as 2016, whereas turnover grew by 8%. Export
of the countries were export grew the most in
of goods to Sweden dropped by 19% over the
2017. Export increased by 34%, influenced the
year, the most important part of which was the
most by export of electrical equipment and
decline of export of electrical equipment. The
ships. The main cause for growth of electrical
growth on the Finnish market was led by export
equipment was the increase of export of
of machinery and equipment, which grew by
mobile communications equipment, which
10%.
may be because products are now transported
In 2017, Latvia remained in the third place, the directly, whereas earlier it was done through
share of which remained on the same level as Sweden.
in 2016, i.e. at 9%. Export grew by 7% over the
The Russian market also indicated a growth,
year. The main influencers were means of
remaining on fifth place in the ranking list of
transport, forming 14% of total export and
target markets after Germany, with 0.1
growing by 20% over the year.
percentage points less of a share. Export grew
Exports by commodity groups in all main commodity groups – mechanical
Machinery and machinery and equipment by 50%, electrical
equipment equipment by 23%, paints, mastics, window
Wood and wood putty and similar products by 10%, plastics and
products plastic products by 23%, and medical and
Mineral products
measuring equipment by 16%.
According to forecasts, economic growth on
Furniture, log houses foreign markets will slow down in 2018,
Metals and metal resulting in the deceleration of the growth of
products export in Estonia. Even though the import
Means of prospects of Estonia’s trade partners will be
transportation weakened, they will still remain strong enough
%
0 5 10 15 20 25 30 and offer good opportunities to our companies
to increase export. According to the experts at
2017 2016
Source: Statistics Estonia the Estonian Institute of Economic Research,
the development of foreign trade will continue
in 2018. The experts’ expectations were divided
as follows: 72% expected export volumes to
increase, 28% for the forecast to remain on the
same level, and no expert expected volumes to
decrease.
Ministry of Economic Affairs and Communications Ministry of Finance 201812 Overview of economy 2017
Import Mineral products were on third place of
imported goods with 10%. The import of
The growth of export demand also significantly
mineral products grew by 23% in 2017, largely
increased the growth of import, because due to
caused by oil price increase on the world
Estonia’s small size, a lot of raw materials and
market. Sending countries with the biggest
products are imported. In 2017, import grew by
share were Lithuania and Russia, together
9& compared to the previous year. Unlike
forming roughly 60% of the total import of
export, import turnover grew in every month.
mineral products and growing by 28% and 15%
The biggest growth occurred at the start of the
over the year, respectively.
year in January, but import turnover was 38%
higher than in 2016. The high increase in Import of chemical products also held a big
January was caused by Tallink purchasing a share, growing by 13% over the year. Over a
new ship. third of this commodity group is formed by
pharmaceuticals, the import of which grew by
Out of important commodity groups, only the
4% in 2017. The other important commodity
import of machinery and equipment was in
group was fertilizers, the import of which grew
decline. The import of machinery and
the most over the year – over 80%.
equipment dropped by 2% over the year,
caused by the 8% decrease of import of The fifth biggest share for imported
electrical equipment. However, the import of commodity groups was metal and metal
mechanical equipment, which forms 40% of all products at 8%. This commodity group was
import in the group of machinery and also the last to exceed an import turnover of
equipment, grew by 8%. Similarly to export, the one billion. The import of metal and metal
decrease of electrical equipment was mainly products grew by 18% in 2017, influenced the
caused by the decrease of import of mobile most by the growth of import of iron and steel.
communications equipment. In addition, The most important goods in this product
integrated circuits form an important share of group were sheet metal products and cast iron
the import of electrical equipment and their and steel scrap. In addition, a significant part
import remained on the same level in 2017 as of the import of metal and metal products is
the year before. Out of the more important formed by iron and steel products, and
commodities, decline also occurred in the aluminium and aluminium products, which
import of transformers, by –3%, and import of grew by 6% and 9% respectively over the year.
cables, by –26%. The main commodities of
Imports by commodity groups
mechanical machinery was computers and
Machinery and
other data processing equipment (growth
equipment
+15%), self-propelled mechanical shovels,
excavators and backhoe shovels (growth Mineral products
+81%), manual instruments (growth +38%) and
printer parts and accessories (growth +29%). Means of transport
The biggest growth in import trade occurred in
Chemical products
the import of means of transport. The import of
means of transport grew by 33% over the year, Metal and metal
also forming the second biggest share of all products
imported products, at 13%. The primary factor Prepared foodstuffs
and beverages
behind the growth was Tallink purchasing a %
new cruiseferry. In addition, other commodity 0 5 10 15 20 25 30
groups of means of transport showed a growth 2017 2016
– vehicles by +12%, railroad or tramway rolling Source: Statistics Estonia
stock and its parts by +44% and aircraft by
+7%. The primary import partners are Sweden,
Finland and Germany. Import to Finland saw
the biggest growth, over twice as much as in
2016.
Ministry of Economic Affairs and Communications Ministry of Finance 2018Overview of economy 2017 13
In 2017, the second biggest share in import
Imports by country of consigner
was held by Germany, who saw a 6% growth.
Finland The main commodity group was means of
transport at a share of 19%, the purchase of
Germany
which grew by 12% over the year. Another
Sweden important commodity group was mechanical
machinery and equipment, but their import
Latvia decreased by 1.2%. Other commodity groups
with a large share were electrical machinery
Lithuania
and equipment, and plastics and plastic
Poland products, the import of which was also higher
%
in 2017 than the year before.
0 4 8 12 16
2017 2016 Lithuania retained third place in the ranking of
Source: Statistics Estonia importing countries at a share of 9%. Import
turnover was over 100 m euros higher than in
Estonia’s primary import partners are EU 2016, growing by 8% over the year. The growth
countries. The share of EU in total import was was largely caused by increased import of
81% in 2017 and import turnover grew by 9% mineral products.
over the year. Import from countries outside
the EU, however, grew by 11%. Sweden’s import volumes were restored in
2017, lifting it back up to fourth place in the
Import volume from CIS countries grew by 26% ranking list. For the past two years, import
in 2017, mainly caused by increased import volumes from Latvia have exceeded those
from Russia. Over 90% of import from CIS from Sweden, but in 2017 import volume from
countries is formed by Russia, the import Sweden grew by 14%. Thanks to that, Sweden
turnover from which grew by 25% over the year. took a higher position than Latvia in the
This was primarily caused by mineral fuel, and ranking list of importing countries with a 0.2%
machinery and equipment. Another important higher share. The most important imported
country of origin among CIS countries is commodity groups from Sweden were vehicles,
Belarus, the import volume of which grew over the volume of which grew by 26% over the year,
50% over the year. electrical machinery and equipment, which
However, import from NAFTA countries was dropped by 4% over the year, and mechanical
declining in 2017. Import volumes were 22% machinery and equipment, which grew by 25%.
less than the year before. Import decreased The main causes for the decline in the group of
from the USA as well as from Canada, by -23% electrical machinery and equipment were
and -42% respectively. Import volumes from mobile communications equipment, electronic
Mexico more than doubled, but its share in all integrated circuits and cables.
import from NAFTA countries is only 6%. The Purchase volumes also grew in Latvia, which
main cause for the decrease is the large fell to fifth place in the ranking list of import
volume of arms and ammunition purchased in countries. The growth of import was 11%,
2016, which drove up the basis for comparison. influenced the most by the doubled increase of
In 2017, Finland remained Estonia’s largest importing mineral products, primarily fuel oils.
import partner with a share of 14%. Import of In addition, the growth of import of wood and
goods from Finland was 18% higher than the wooden products had a significant impact on
year before. This was most impacted by Tallink growth, at 15% higher than in 2016.
purchasing a new ship. In addition, the most Out of the more important import partners,
important commodity group – electrical Poland also showed a large growth, with a
machinery and equipment – grew by 6%. The change of 9% compared to the previous year.
growth was led by the increase of purchase of Import volumes also grew from China and Italy,
mobile communications equipment and by 7% and 6% respectively. Growth was most
remotes, panel switchboards, etc. influenced by the increase of import of
machinery and equipment.
Ministry of Economic Affairs and Communications Ministry of Finance 201814 Overview of economy 2017
According to forecasts, the growth of import
can be expected in 2018 similarly to export.
Import will increase thanks to increase of
import of inputs necessary for manufacture,
acceleration of investing activity, and also the
continued growth of internal demand. The
assessment of experts who took part in the
forecast of the Estonian Institute of Economic
Research in March 2018 was somewhat lower
compared to that of the year before, but
nevertheless positive. The experts’
expectations were divided as follows: 67%
expected import volumes to increase, 33% kept
the expectations on the same level and a
decrease of import volumes was not forecast.
Ministry of Economic Affairs and Communications Ministry of Finance 2018Overview of economy 2017 15
Manufacturing industry
Estonian manufacturing industry involves over 7,000 active companies, most of which are small and
medium-sized. There are more than 200 companies which employ at least 100 people, but these
employ half of all employees in the industrial sector. Large companies include, for example, the
manufacturer of mobile communications equipment Ericsson Eesti AS, manufacturer of electrical
appliances ABB AS, manufacturer of cable ties PKC Eesti AS, shipbuilding and metal processing group
BLRT Grupp AS, wood processor Stora Enso Eesti AS, comforter, pillow, bed and mattress
manufacturer AS Wendre, car safety system (seat belt) manufacturer AS Norma, and meat products
manufacturer AS HKScan Estonia.
In Estonia, the share of the industrial sector in the economy is nearly as big as the EU average based
on value added (approx. 15%). However, the share of persons employed in the manufacturing industry
is one of the highest in EU countries (nearly a fifth), indicating that as a rule, foreign companies are
able to generate more value added with the same number of employees.
The manufacturing industry as a whole is Estonia’s biggest employer – nearly every fifth employed
person is working in that field. In the past ten years, however, the number and share of employees in
the economy has still decreased and growth of manufacture is caused by increased productivity. Jobs
have been created in manufacture of electrical equipment, the electronics industry has grown the most
in terms of production volumes. Industries with the biggest number of employees are the lumber
industry, food manufacture, and the metal industry. The economic crisis resulted in a decrease of jobs,
but the manufacturing industry was also one of the first where the situation improved and more jobs
were created again. Export played an important part in the recovery. The sector is heavily dependent
on foreign markets where over 60% of the output is sold. The primary export markets are Finland and
Sweden, where the majority (over 60%) of direct investments made in Estonian manufacturing industry
have come from.
Forecasts do not expect the number of employees in the manufacturing industry to change
significantly in upcoming years, but a continued decrease of employment is expected in more labour-
intensive fields. Jobs are expected to be added in fields that create more value added (electronics) but
the lumber industry, which is based on local raw material, also holds potential for growth. However,
increase of productivity remains the basis for competitiveness, requiring continued investments in
machinery and equipment as well as the employees, and the development of products as well as
improvement of work procedures.
% Share of sector in economy % The situation of the manufacturing industry
100 100 improved in 2017 together with the general
80 62,6 96,1 80
60 60 increase of economic activity. Production
40 40 volume grew at the fastest pace of recent
15,4 19,0
20 20 years, manufacture increased in nearly all
0 0
fields, the economic indicators of the sector
Share in Share of Share in Ratio to
value added exports in employment average improved. Enterprises expect the growth to
sales wage continue in 2018.
Source: Statistics Estonia
According to preliminary data, the production
million € Sales and exports % y-o-y
volume of the manufacturing industry grew by
12 000 8
10 000 6 3.5% in 2017 (adjusted to the number of work
8 000 4 days), which was the best indicator in the past
6 000
4 000 2 six years. The growth was nearly twice as fast
2 000 0 in Estonia. Latvian and Lithuanian output
0 -2
increased to the same extent, and the year was
2012 2013 2014 2015 2016 2017*
Sales Exports also successful for the Finnish and Swedish
Change in sales Change in exports industries.
Source: Statistics Estonia
Ministry of Economic Affairs and Communications Ministry of Finance 201816 Overview of economy 2017
Preliminary data show that in 2017, Estonian Wage developments of the manufacturing
manufacturing companies produced 6.5% industry have generally followed changes in
more output than the year before. Biggest Estonian average wages, which also remained
contribution to the growth came from the wood the case in 2017. Average gross wages in the
and metal industries, whereas a bigger drop in manufacturing industry grew by 6% over the
output could be seen in the electronics year. Together with increased number of
industry. employees and working hours, labour costs of
the sector grew by a tenth on the whole. At the
Similarly to the EU as a whole, producer prices
same time, other expenses grew at a more
also began to rise in Estonia in 2017. Producer
modest rate and total expenses grew at a
prices grew by 4% over the year in the
slower pace than sales revenue. Thanks to
manufacturing industry. However, signs of
that, total profit grew by nearly a third, but the
deceleration of the price growth could be seen
cost-effectiveness of the profit still remained
at the end of the year. Producer prices grew
below the historical average. It is likely that
faster than average in the food industry and
final statistics will not show such a large
paper industry. The growth of export and
increase in profit, because the gap between
import prices was even faster than that of
ongoing statistics and final statistics has
producer prices. The prices of oil products and
generally been quite big. According to
shale oil grew steeply, having spent several
entrepreneurial statistics, value added grew by
years in a decline. Nevertheless, the growth of
more than a tenth, all productivity indicators
export and import prices slowed noticeably as
also improved, except for the proportion
the year progressed.
between sales revenue and labour costs.
Even though producer prices rose, the sale of
The investing activity of the manufacturing
the manufacturing industry increased at the
industry grew in 2017. According to preliminary
same speed as manufacture. Export grew by
data, investments in tangible fixed assets grew
5%, sales to the domestic market twice as fast.
by nearly a third. The growth of investments
The share of export dropped to the lowest point
was rather uniform across areas of activity. As
in recent years; it has only been lower during
a rule, two thirds were directed towards
the last economic crisis. Export was first and
acquiring machinery and equipment, a quarter
foremost influenced by the fall of sales in the
of capital investments had to do with acquiring
electronics industry, but at the same time
or building and reconstructing facilities. More
several industries such as the food industry,
means were also directed to all other fields.
wood industry and manufacture of
Investments in computers and computer
construction materials received important
systems grew the fastest, doubling compared
support from increased domestic demand.
to 2016.
The favourable economy resulted in demand
for additional employees, but the growth of Share of sub-sectors in sales of
employment was limited to a few percentage manufacturing industry
Rubber and Building
points in the manufacturing industry plastic materials
Metal
Chemical industry
(according to a labour survey, employment industry industry
industry 11%
increased by 3.5%). Considering the situation 7%
3% 4%
of fast wage growth, enterprises are looking
increasingly towards automatization and Wood
Equipment
increasing efficiency, and at the same time it is industry
industry
17%
also difficult to find employees on the labour 19%
market. The biggest job creators in 2017 were
the metal industry, electrical appliance
manufacture, and the food industry. According Textile and
to preliminary data, the number of employed clothing
industry Food
persons dropped in the textile industry, industry Furniture
4% Other sub-
manufacture of motor vehicles, and the oil 14% industry
sectors 5%
industry. Source: Statistics Estonia 16%
Ministry of Economic Affairs and Communications Ministry of Finance 2018Overview of economy 2017 17
Strong demand and growth of production Value added, labour costs and productivity
volumes were also reflected in assessments of million € % y-o-y
3 500 12
the entrepreneurs. Representatives of the 3 000 10
8
manufacturing sector questioned by the 2 500 6
4
2 000
Estonian Institute of Economic Research 2
1 500 0
1 000 -2
valued all observed indicators at a higher rate, 500 -4
-6
incl. demand. The indicator of confidence rose 0 -8
above the historical average. The importance 2012 2013 2014 2015 2016 2017*
of insufficient demand as a factor limiting Value added
production volume decreased (at the same Labour costs
time, roughly half of those interviewed Change in total productivity (r.s.)
Change in labour costs productivity (r.s.)
highlighted this factor) but labour shortage
Source: Statistics Estonia
increased. At the start of 2018, volume of % y-o-y
million €
Investments of companies
orders, expectations to production volume for
700 40
upcoming months and number of employees 600 30
were valued as highly as the year before, but 500 20
expectations to price increase were higher. 400
10
Production volumes also indicated a growth. 300
200 0
In the EU, the industry confidence indicator 100 -10
reached the highest level of recent years in 0 -20
early 2018. The situation can also be 2012 2013 2014 2015 2016 2017*
considered good or very good on target Investments in fixed assets
markets important for Estonian industry, such Change in investments (r.s.)
as Finland, Sweden and Germany. Therefore, Source: Statistics Estonia
the economic environment can be considered
advantageous for the manufacturing industry
in 2018.
thousand Number of employed people % y-o-y
140 8
120 6
100 4
80
2
60
40 0
20 -2
0 -4
2012 2013 2014 2015 2016 2017*
Number of employed people (labour survey data)
Number of employed people (business statistics)
Change in number of employed people (r.s.)
Change in number of employed people in companies (r.s.)
Source: Statistics Estonia
Average gross wages % y-o-y
1 400 9
1 200 8
7
1 000 6
800 5
600 4
400 3
2
200 1
0 0
2012 2013 2014 2015 2016 2017
Average wages (in euros) Change (r.s.)
Source: Statistics Estonia
Ministry of Economic Affairs and Communications Ministry of Finance 201818 Overview of economy 2017
Manufacture of food products and beverages
In terms of production volume, the food industry is one of Estonia’s largest industries and is the main
activity for nearly 700 companies. Even though most of the sales revenue is generated on the domestic
market, export volumes have also indicated a constant growth. Over 16,000 people are employed in
manufacture of food products and beverages.
Food and beverage producing companies are found all over Estonia. There are food producing
companies among larger companies in all regions of Estonia. The biggest company in the industry is
the meat processing company AS HKScan Estonia in Lääne-Virumaa. Another large meat processing
company is the Atria group, located in Southern Estonia. Major industrial bakeries are AS Eesti Pagar
in Paide and AS Leibur in Tallinn. Major companies of the food industry also include the beverage
manufacturers AS Saku Õlletehas in Harju County and AS A. Le Coq in Tartu County, major dairies are
Valio Eesti AS and the Maag Group, including Farmi Piimatööstus and TERE AS. Major fish processing
companies are AS M.V.WOOL in Harju County and AS Paljassaare kalatööstus as part of the Vičinuai
group, Japs M.V.M. AS in Pärnu County and OÜ Vettel in Saare County. The largest manufacturer of
sweets is AS KALEV.
In recent years, a significant problem for the food industry has been low productivity. In comparison
with EU manufacturers, the productivity of Estonian food manufacture is less than a half of the EU
level. This is more than in Latvia or Lithuania, but far from the level of Nordic countries. In order to
ensure future competitiveness, automatization must continue and further efforts must be made
towards manufacture requiring less labour.
% Share of sector in economy % Share of sub-sectors in sales of food and
100 100
beverage production
80 80 Production
of beverages Processing
60 60 Other and
11%
40 86,7 40 22% preserving
20 13,1 20 Production of of fruit and
2,0 7,2 32,2 vegetables
0 0 bakery and
pasta 7%
Share in Share in Share of Share in Ratio to
value man. exports in employ- average products
Meat
added industry sales ment of wage 10%
processing
exports man. industry
industry Production of
Source: Statistics Estonia 19%
prepared animal
million € % y-o-y fodder Fish
Sales and exports
2% Dairy processing
1 800 20
1 600 industry industry
15 Source: Statistics Estonia
1 400 22% 7%
10
1 200 The year 2017 turned out to be successful for
1 000 5
800 0
manufacture of food products and beverages,
600
-5 quick growth was seen on the domestic market
400
-10 as well as in exports. Even though Russian
200
0 -15 limitations to products of Estonian companies
2010 2011 2012 2013 2014 2015 2016 2017* continued, new markets have been found and
Sales Exports production volumes have increased. Instead of
Change in sales (r.s.) Change in exports (r.s.) poor demand, growth is limited by the labour
Source: Statistics Estonia
shortage and at times, quickly growing prices
of raw produce. The fast growth of the alcohol
excise duty continued to trouble beverage
manufacturers, increasing trade across
borders and decreasing alcohol sales on the
domestic market.
Ministry of Economic Affairs and Communications Ministry of Finance 2018You can also read
