Country Report Estonia
- ID: 2114012
- January 2016
- Region: Estonia
- 67 Pages
- The Economist Intelligence Unit
The Baltic states suffered disproportionately in 2015 from the sharp contraction in the Russian economy and Russia's import ban on EU foodstuffs. Lithuania and Estonia were the worst hit, but all three states saw a sharp deterioration in their export performance. In 2016 we expect the effects of the fall in Russian demand to be much weaker as the Russian economy stabilises, Baltic export market diversification bears fruit and growth in some of the countries' other traditional trading partners picks up. As the Baltics are small, open economies, this will contribute to a strengthening of growth in all three states this year.
In January-November 2015 exports from Latvia grew by 1.2% year on year, in euro value terms. In the same period, exports from Lithuania fell by 5.7% and exports from Estonia fell by 4%. In all three states this marks a significant deterioration compared with 2014, when export earnings rose by 2.3% in Latvia, but fell by 0.7% in Lithuania and 1.7% in Estonia. Moreover, since exports accounted for 58% of GDP in Latvia in 2014, and a very high 82% in Lithuania and 83% in Estonia, the downturn in export growth last year has had an impact on overall GDP growth. We estimate a slowdown to real GDP growth of 2.4% in Latvia, 1.6% in Lithuania and 1.3% in Estonia in 2015.
The single most important issue facing growth across the Baltics in 2015 was a sharp contraction in demand from Russia. This was prompted initially by Russia's import ban on EU foodstuffs, implemented in response to the EU's imposition of economic sanctions on Russia in 2014, which resulted in a steep fall in demand for some specific food exports from the Baltics. However, a deep recession in Russia in 2015-with GDP contracting by an estimated 3.8%-had a much more significant effect on Baltic exports, as it resulted in a wholesale reduction in Russian demand. This was exacerbated by a very marked weakening of the rouble, which made imports from the euro zone more expensive in Russia. SHOW LESS READ MORE >
Country Report Estonia
Brighter outlook for exports in 2016
Russia's outsized impact on the Baltic external sector
The oil price fall depressed export earnings
Improved export outlook for 2016
Key risks: oil price developments and the future of the Schengen area