OREANDA-NEWS. March 12, 2014. Although growth slowed in Estonian exports in 2013, market share increased in the markets of Estonia’s eleven main trading partners a little faster than before in the first three quarters of the year, and was 5.5% bigger over the year.

Demand decreased by 1.7% at current prices in the eleven main trading partners in the period, while Estonian exports grew by 3.6%. Improved competitiveness and an increased market share for exports helped offset weak foreign demand to a significant degree. The better competitiveness of the Estonian economy will be seen in the long-term in GDP per capita growing faster than it does in Estonia’s trading partners. Faster growth in incomes will ensure a larger market share for Estonian exports in the main target markets.

The market share of Estonian exports in the global economy increased by an average of 5.4% a year in 1999-2012. Demand has grown faster in Estonia’s main trading partners than the global average, and this has aided the growth in market share, while global demand for the products that Estonia exports has also increased. Improved competitiveness has also aided the growth in market share.

The faster rise in unit labour costs in Estonia than in those of competitor countries has restricted the ability of goods exports to grow by almost the same amount. The euro appreciated by a nominal 1.4% in 2013 against the currencies of Estonia’s trading partners. This slowed price growth in Estonia but was restrictive for exports. In conjunction with the strengthening of the real exchange rate there was also a decline in the price advantage in export markets that had arisen following the crisis. An important role was also played by non-price competitiveness factors, which include the features of goods and services, changes in their appearance or quality, the division of labour within industries, and the increasing importance of services.

The labour productivity in Estonian companies is among the highest in central and eastern European countries. Differences in productivity between companies are also smaller than those in other countries. That these differences are small is in one sense good, as the bulk of companies are in the lower ranges of productivity, and these companies are relatively competitive in Estonia. In another sense it is not so good as the highest productivity levels in the top Estonian companies are relatively close to the average. Estonia stands out from other countries in the distribution of resources by having a relatively efficient service sector. More productive companies have grown faster than less productive ones since the crisis, which shows that the effective distribution of resources has increased growth in Estonian labour productivity.

The competitiveness review is published on the Eesti Pank website.