Overall price pressures have eased but have not disappeared. The price level in Estonia rose by 4.7% in the first eight months of the year, and one-third of that rise came in April when support for energy prices ended. New price pressures have mainly been caused this year by services, as rising service prices have been pushed by rapid wage growth being transferred to prices. All weights on the spiral.

Overall inflation will probably remain around 4-5% until the end of the year. Oil prices have started to rise in global markets, and the reference base from a year ago will supposedly start to cool inflation from September. The Bank of Estonia forecasts that inflation will average close to 9% in 2023.

Foreign markets remained pessimistic in the second quarter and the slump in demand caused foreign trade volumes to shrink. Estimates by businesses of the sufficiency of export orders are notably poorer in Q3 than they were in Q2, indicating that the difficulties have still not eased. The mood among businesses is also pessimistic in several of Estonia’s main trading partners.

The economies of Estonia’s trading partners have been weak this year and this has reduced demand for goods and services from Estonia. The turnover of Estonia’s foreign trade is lower than it was a year ago because of the decline in trade in goods. Exports of goods fell by 9.6% over the year and imports by 11.4%. The turnover of exports of services was 7.9% larger in Q2 than it was a year earlier, while the turnover of imports of services was up 2.2%.

The difficulties faced by exports of goods come mainly from the downturn in manufacturing, where sales volumes of exports were down in almost all areas in the second quarter.

Businesses in Estonia and Europe remain pessimistic in their expectations because of the deepening general economic uncertainty. Estimates by Estonian companies of their competitiveness were even poorer in Q3 than they were in Q2. Several important export markets for Estonia are also in a pessimistic mood, as estimates of competitiveness are at low levels in Germany and in Finland.