The Estonian Economy - May 2016
Manufacturing sector investment dynamics
  • Despite the gradual drop since 2014, investments’ share in Estonian GDP still the largest in euro area
  • More investments needed in manufacturing sector
  • Wood sector makes the largest positive contribution to manufacturing sector investment growth. 

Investment share in GDP highest in euro area 

Although the volume of total investments has been decreasing since 2014, investments’ share in GDP is still the largest in the euro area. Roughly 65% of investments in Estonia come from the business sector, whereas in the EU the average is 60%. 

Investment structure needs improvement 

Comparing the long-term investment structure of Estonia to the EU average, there are some large differences. In Estonia, considerably more investments have been made in the fields of electricity generation and transportation, whereas manufacturing sector investments are lagging. In Estonia, manufacturing sector investments make up roughly 12% of total investments, much lower than the EU average of 16%, even though the manufacturing sector is relatively more important in Estonia. 

Manufacturing sector hampered by rapid wage growth and lower output prices 

The decrease in manufacturing sector investments is influenced by falling profitability, which, in turn, is a result of multiple factors: demand is weak and prices are falling, while labour costs are biting profitability. The situation is different among the subsectors of manufacturing. The wood industry has increased its share in investments, whereas the food industry has had a long period of decreasing investment volumes (although the situation has shown improvement in recent quarters). The manufacture of electronics and electrical equipment, on the other hand, has witnessed a serious decrease in profitability, and investments’ share of turnover has fallen very low.

PDF Estonian Economy - manufacturing sector investment dynamics

For more information about this report, please contact Mr. Siim Isküll, siim.iskull@swedbank.ee, +372 888 7925

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