Estonia
In-depth country-focused analysis on Estonia's economic, political and operational risk environment, complemented by detailed sector insight

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.

Country Risk

Estonia Country Risk

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Core Views

  • 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.

  • The...

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Estonia Industry Coverage (10)

Autos

Estonia Autos

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BMI forecasts vehicle sales to increase 18.5% in 2013. This comes from 18% growth in passenger car sales and 21.2% increase in the commercial vehicle segment.

Growth in the passenger car segment over the year to date has been driven by pent-up demand in the market and some modest improvements in broader consumer sentiment. We forecast 18% growth in 2013.

BMI believes that manufacturing and construction activity in the country, key drivers of growth in the commercial vehicle segment, has been fairly robust over the course of 2013, and we expect this to continue over the remainder of the year and into the coming months.

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Food & Drink

Estonia Food & Drink

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BMI Industry View

As Estonia's unemployment rate continues to fall and household incomes continue to rise, its consumer outlook appears positive. The retail sector is feeling comfortable and plans further modest expansion of ranges and premises during 2014, with the mass grocery retail players being no exception. The more stable eurozone should also buoy up Estonia's economic and investment outlook, although the fragility of some eurozone members' economies means that continued stability of the currency is not guaranteed.

Headline Industry Data (local currency)

  • 2013 per capita food consumption: +2.22%; forecast compound annual growth rate (CAGR) to 2017: +1.71%.

  • 2013 alcoholic drinks sales (volume): +0.44%; forecast CAGR to 2017: +0.68%.

  • 2013 soft drinks sales (volume...

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Freight Transport

Estonia Freight Transport

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Estonia registered a 0.4% year-on-year (y-o-y) rise in GDP on a seasonally and working-day adjusted basis in Q3 2013, according to preliminary data released by Statistics Estonia (RTT News). This followed the 1% increase in GDP registered in Q2 2013. Economic growth was driven by the trade sector and supported by stable growth in retail trade.

Although headline growth in 2013 will fall short of the robust levels achieved over the past three years, Estonia's rapid and ongoing recovery from severe recession following the global financial crisis in 2008 continues to drive improvements in the domestic economy. Formerly propelled by growth in exports and fixed investment, the shape of growth in coming quarters will be weighted towards private consumption, propping up economic activity until external demand gradually recovers.

With one of emerging Europe's best business environments and balanced growth in both goods and...

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Infrastructure

Estonia Infrastructure

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BMI Industry View

BMI View : Improving optimism in the private household sector and the consequent rebound in the residential and non-residential building segment will help drive average growth of 3.8% year-on-year (y-o-y) in the Estonian construction sector between 2014 and 2023. Meanwhile, the contribution of the infrastructure sub-sector in the overall construction industry value growth will be negligible as dearth of government funding will limit transport and energy projects in the country.

Our core view for the Estonian residential and non-residential construction sub-sector envisages growth averaging over 5% y-o-y between 2014 and 2023, which will help the sub-sector account for 74.7% of the total construction industry value by the end of the forecast period - compared with its share of 66.1% in 2013. Although...

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Insurance

Estonia Insurance

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BMI View: In theory, Estonia should be one of the most dynamic markets for insurance in Central and Eastern Europe. The reality is rather more prosaic

The business environment is sound. The regulator is highly regarded. In the recent past, the economy has been resilient, if not exactly booming. Most importantly, the local subsidiaries of very substantial multi-nationals dominate the non-life segment and comprise the life segment. These are companies that are able to gain economies of scale through operating in much larger markets nearby (e.g. Scandinavia or Austria) as well as across all three of the Baltic states. Even if the economic, political and business environments of Estonia were very challenging, foreign majors such as VIG (which operates as Compensa), RSA, Gjensidige Baltic,...

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Medical Devices

Estonia Medical Devices

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Espicom Industry View:   The medical device market is set to grow at a higher CAGR between 201 3 and 201 8 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...

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Pharmaceuticals & Healthcare

Estonia Pharmaceuticals & Healthcare

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BMI View: Against a backdrop of GDP contraction in Q114, Estonian pharmacy sales posted considerable growth, driven by demand for over-the-counter medicines and an uptick in prescriptions written. Private consumer spending will continue to bolster pharmaceutical sales in 2014 as wage growth continues. Despite this data, Estonia will continue to remain a marginal market in the Central and Eastern European region.   Whether or not a fiscally conservative policy in healthcare spending can survive Estonia's ageing population and the subsequent growth in demand for medicine is highly dependent on broader macroeconomic trends. Nevertheless, there are also potential rewards in the market. Any growth in demand for medicine is highly dependent on unemployment levels and the raising of premiums by the HIF.

Headline Expenditure Projections...

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Shipping

Estonia Shipping

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In the ports and shipping sector, competition from the new Russian Baltic port of Ust-Luga has been a negative for Estonia's port of Tallinn. But despite uncertainty on this front Tallinn has been coping well and diversifying its business. Tonnage at the Estonian port fell by an estimated 4.2% in 2013 and, we now expect it to register small but positive growth in 2014. The port authorities have claimed that a policy of diversification will eventually begin to pay off: we expect moderate growth in container activity levels in 2014.

Recovery To Gather Pace in 2015, Russia Permitting

Relative to our last quarterly report, we have downgraded our forecast for GDP expansion in Estonia this year, although we see the recovery gathering pace in 2015 and 2016. GDP came in below expectations in Q1 2014, contracting by 1.2% on a year-on-year (y-o-y) basis. The biggest drag on growth appears to be net...

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Telecommunications

Estonia Telecommunications

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BMI View: We have mixed views with respect to the E stonian telecoms market. On one hand, it is one of the region's most developed broadband economies, with large strides having been made in the rollout of next-generation access technologies such as fibre and mobile broadband, However, it is also a very small market and operators have few organic growth opportunities before them, pushing them into aggressive price competition and pre- to postpaid migration strategies that have yet to deliver enhanced revenue-creation. There are few alternative operators actively challenging incumbent Elion on anything other than the mobile services front and the government continues to wield undue influence over the market through policy-making, regulatory and service provider bodies. The European Commission is...

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Tourism

Estonia Tourism

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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...

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