Our comprehensive assessment of Estonia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Estonia, as well as the latest industry developments that could impact Estonia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Estonia before your competitors.
Estonia Country Risk
Although Estonia's current account flipped into surplus in Q214, the positive balance will not be experienced for long with EU economic sanctions on Russia suppressing exports and the accelerating economic recovery boosting import levels. The deficit will remain manageable in 2015 and 2016, with the services account set to remain a significant positive contributor.
The Estonian Reform Party is on course to retain first place in the March 2015 general election, boosted by its competent economic management and the hard line taken with Russia during the Ukraine crisis. The identity of the junior coalition partner is more uncertain with three parties competing for second spot, and a fractious election campaign could result in more aggressive political discourse following the vote.
Estonia Industry Coverage (10)
2014 has proved a positive year for new vehicle sales within Estonia. Over the first nine months of the year, passenger car (PC) sales were up by 5% year-on-year (y-o-y), at 15,874 units, according to figures from Estonia's association of car dealers and service companies (AMTEL). September's monthly performance was highly impressive, up 19% y-o-y, at 1,841 units for the month.
On the commercial vehicle side, 8M14 figures from the European Auto Manufacturers Association (ACEA) show a total of 1,884 light commercial vehicles (LCVs) sold in country, with a further 508 medium and heavy commercial vehicles sold, plus a further 79 buses, for a total of 2,471 units sold year-to-date.
Adding the 2,471 CV units to the 14,033 PCs sold over 8M14 makes for a total new vehicle market of 16,504 units. On current sales trends, this leaves the Estonian new vehicle sales market on target to hit BMI's forecast of...
Food & Drink
Estonia Food & Drink
BMI Industry View
The Estonian retail sector remains positive and is planning further expansion of both ranges and premises during 2015, with mass grocery retail players being no exception. The country's economy has turned a corner and will post relatively strong real GDP growth over the next two years. Although Estonia's unemployment will fall at a slower rate, household incomes will continue to increase and this rising domestic demand will more than offset lower export growth, as relations with Russia remain strained.
Headline Industry Data
2014 per capita food consumption (local currency): +2.04%; forecast compound annual growth rate (CAGR) to 2018: +2.06%.
2014 alcoholic drinks sales (volume): -0.39%; forecast CAGR to 2018: +0.54%.
2014 soft drinks sales (volume): +2...
Estonia Freight Transport
Estonia's freight transport sector will continue to face headwinds in 2015, with the country's current account returning to deficit in 2015, with EU economic sanctions on Russia suppressing exports and the accelerating economic recovery boosting import levels.
Despite a flip into surplus in Q2 2014 we hold to our forecast for Estonia to post current account deficits in 2015 and 2016. The ongoing Russian ban on the import of Estonian food products will restrict export growth while the accelerating economic recovery, founded on strong private consumption, will see demand for imports increase. As has been the case for a number of years we expect Estonia's robust and vibrant ICT sector and expanding transport network to ensure the services account continues to post a surplus.
We forecast the current account deficit to widen to 1.5% of GDP in 2015 and 1.7% in 2016, before an improvement in external demand (particularly from...
BMI Industry View
BMI View : The only real growth stories of note in our outlook for the Estonian construction sector are a relatively strong residential housing subsector, driven by rising house prices and high demand, and developments at the country's ports with further trade routes and partners being targeted. While 2015 will be a return to growth after two years of contraction for the construction sector at 3.5%, the long-term outlook is unspectacular low single-digit growth.
Although business confidence is still relatively weak - owing to cautious recovery in the eurozone, there is significant optimism in the household sector. As mentioned, the dominant residential building sector will be the main driver of construction growth to...
BMI View : Estonia is a small but fairly rapidly growing insurance market. In the vastly more important non-life segment, the economic recovery, and initiatives by the insurers themselves, should underpin high single digit growth in premiums in most sub-sectors. The main exception is the motor vehicle segment. Volumes are unlikely to grow because the national vehicle fleet's size is unlikely to change over the course of the forecast period. Some insurers may be able to increase prices. In the life segment, a campaign by the major multi-national companies that are present in Estonia to educate households and companies should ensure that premiums rise quite quickly from a low base. In the short-term, though, the weakness of the economy will be a challenge for companies in both...
Estonia Medical Devices
BMI Industry View: The medical device market is set to grow at a higher CAGR between 2013 and 2018 than was recorded for the 2008-2013 period. However, the small size of the market limits scope for the purchase of more expensive items. The medical device market is largely supplied by imports, principally from Western suppliers. The balance of trade has been positive since 2011, due to export growth. There is a small domestic production sector but this tends to concentrate on exports to Western Europe and former Soviet countries.
Headline Industry Forecasts
Pharmaceuticals & Healthcare
Estonia Pharmaceuticals & Healthcare
BMI View: Estonian pharmaceutical sales posted larger than expected growth in 2014, and we have revised our ten year forecast upwards to reflect this new data. We expect pharmaceutical sales growth to decelerate in 2015 as the impact of the Russian slowdown moderates economic activity. With Estonia seeing external tailwinds from the eurozone and Scandinavian countries, we expect a reacceleration of growth in pharmaceutical sales in 2016. Western-Russian relations will continue to present downside risk to our forecasts.
Headline Expenditure Projections
Pharmaceuticals: Sales will rise from EUR292mn (USD391mn) in 2014 to EUR308mn (USD339mn) in 2015, up 5.7% in local currency terms and down 13.3% in US dollar terms. Forecast revised upwards from last quarter....
Port Of Tallinn To See Moderate Growth In 2015
Estonia's Port of Tallinn will see slightly faster growth in tonnage and box throughput in 2015 compared to 2014. Tonnage in 2014 grew by only 0.3%, but this was the first expansion after three consecutive years of falling volumes, reflecting the diversion of Russian transit traffic to the rival port of Ust-Luga. Despite continuing concerns over trade with Russia, we believe both bulk tonnage and box traffic is now back on a sustainable growth path, reflecting a moderate but continuing domestic economic recovery and diversification of trade.
Our overall view of the Estonian economy this year is upbeat, based on the hypothesis that strong real incomes, low inflation, and low unemployment will continue to support a revival in domestic consumption that will drive the economy forward. The foreign trade picture is mixed with difficulties...
BMI View: Estonia's telecoms sector is one of the most developed in the region, particularly with regards to the deployment of advanced next-generation wireline and mobile broadband technologies and services. However, its small geographical size and relatively closed nature means that new entrants have very few opportunities to develop their businesses and this has the potential to hamper innovation in the field of new solutions and services. Eesti Telekom continues to dominate virtually all aspects of the electronic communications services market and the regulator's reluctance to open up the broadband infrastructure access market still further means that the situation is unlikely to change in the medium term. That said, we believe pressures are mounting on the fragmented cable TV sector to consolidate...
BMI View: Overall we maintain our outlooks for the Baltic states' tourism sectors over 2015. Although the countries stand to lose out due to the ongoing issues (both economic and political) arising from the Russia-Ukraine tensions, and this will constrain arrivals from these countries, we believe that these losses will largely be mitigated by increased inter-regional tourism within the three Baltic states, as well as from other European countries which increasingly view the Baltic region as a more stable alternative to Russia and Ukraine. In particular we feel that Lithuania's tourism sector could see substantial growth over the longer term if its bid to join the euro is successful, as it will facilitate multilateral tourist traffic from and to the eurozone.
One of the main developments over 2014 has been the advancement of the proposal to include...