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)
BMI View: We believe that a combination of a recovering economy and greater investment in fleet renewal from business will lead to further growth for the Estonian new vehicle sales market in 2016. We are targeting almost 10% growth for the sector as a whole, with commercial vehicles set to outperform passenger cars.
|Passenger Car And Light Commercial Vehicle Sales|
|f = BMI forecast. Source: National sources, BMI...|
Food & Drink
Estonia Food & Drink
BMI View : The Estonian retail sector remains positive and is planning further expansion of both ranges and premises during 2016, with mass grocery retail players being no exception. Domestic demand will remain the largest contributor of growth in 2016, as strong real wages and unemployment dynamics bolster consumer spending. However, as inflation returns to higher levels, we expect household purchasing power to reduce in comparison to 2015.
Headline Industry Data
2015 per capita food consumption (local currency): +1.4%; forecast compound annual growth rate (CAGR) to 2019: +1.8%.
2015 alcoholic drinks sales (volume): 0.2%; forecast CAGR to 2019: +1.0%.
2015 soft drinks sales (volume): +3.4%; forecast CAGR to 2019: +0.3%.
Estonia Freight Transport
BMI View: Estonia's freight transport sector will continue to be affected by a drop in exports owing to a lack of demand from Russian markets (as a result of the food import ban) in addition to continuing economic weaknesses in Europe and especially in the Nordic countries, two of which are Estonia's top export destinations. Rail freight dominates the country's freight mix and will continue to do so over the medium term, benefit...
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, marked by increasing competition and domination of the motor vehicle and property insurance sub-sectors. 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 where volumes are unlikely to grow, though this segment has posted growth over recent years. We also note that 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 will rise quite quickly from a low base over the medium-to-long term.
Estonia Medical Devices
BMI View: Estonia's medical device market will increase at a modest 2014-2019 CAGR of 2.3%, which is slightly above average for the Central & Eastern Europe region. The market is heavily reliant on imports, but its small size limits the scope for the purchase of more expensive items.
|Total (USDmn)||Per Capita (USD)||Total (Local Currency mn)||Per Capita (Local Currency)||...|
Pharmaceuticals & Healthcare
Estonia Pharmaceuticals & Healthcare
BMI View: We expect growth in Estonia's healthcare expenditure to decelerate over the long term given the country's fiscally conservative nature, the limited capacity of the national health insurer to accommodate further healthcare spending growth and BMI's outlook for the country's economy over the long term. Drugmakers can expect to see constrained revenue growth in the country as pricing pressures and restrictive drug reimbursement will be employed by the Estonian health insurance fund to restrict healthcare expenditure.
Headline Expenditure Projections
Pharmaceuticals: Sales will rise from EUR292mn (USD391mn) in 2014 to EUR310mn (USD341mn) in 2015, up 6.3% in local currency terms and down 12.8% in US dollar terms. Forecast revised upwards from last quarter.
Port Of Tallinn To Regain Positive Growth In 2016
Trade volumes in Estonia look to be in a healthy position going into 2016, with growth figures looking set to rise in the short to medium term. Imports will see slightly more favourable growth than exports but both will impact favourably on Estonia's shipping industry as evidenced by a predicted rise in throughput at the Port of Tallinn, at least until 2017. Here, container throughput growth looks most healthy with 4.01% growth predicted for 2016, rising to 6.37% by 2017.
Estonia's economy is in a strong position, buoyed up by low unemployment and inflation figures. With GDP forecast to continue to grow at an average 2.9% y-o-y growth rate between 2015 and 2019, consumer demand looks set to remain strong, which will boost trade figures in the country. Estonia's importance as a key transshipment...
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. Cable broadband operator Starman could become a catalyst for change as it makes strategic acquisitions and augments its service portfolio. Buying 4G licensee GO Network would transform it into a major multi-play service provider and alter market dynamics.
|Customers Migrating To Premium Services|
|Estonia Mobile Market Forecasts...|
BMI View: We continue to hold a broadly positive outlook for the Baltic countries' tourism sectors in 2016 and beyond. While these markets will continue to suffer the effects of political and economic turmoil in Russia and Ukraine, this will not prevent further robust growth in tourist arrivals. We expect growth to be supported by increased intra-Baltic and wider European tourism on the back of improving economic conditions across the continent. Of the three Baltic countries, we maintain our view that Latvia and Estonia will see the strongest arrivals growth over the next few years, averaging around 5-6% annually.
Key Updates & Forecasts
The Baltic region's tourism sector will continue to grow at a healthy rate in 2016 with visitor arrivals in Estonia, Latvia and Lithuania...