Europe’s industrial recession not yet felt in the Baltics
Despite unpleasant trends in global manufacturing, as well as declines in manufacturing volume elsewhere in Europe, the manufacturing industry in the Baltics continues to perform nicely. In all three Baltic countries, growth in the manufacturing industry in the first quarter of 2019 was within the boundaries of 3-5%. This may show that, despite the growing workforce deficit and high wage increases, Baltic manufacturers are still competitive enough to not only maintain, but also increase their market share in the export market. At the same time, strong competitiveness is not the only factor in the Baltic region’s resilience against current external shocks. This resilience can also largely be put down to the fact the the Baltic countries are integrated comparatively little into Europe’s auto manufacturing delivery chains, as well as in chip and other IT component manufacturing, which are currently seeing the fastest decrease in activity.
In the first quarter of this year, in comparison with the first quarter of 2018, the fastest-growing areas of the manufacturing industry in the Baltics were various mechanism and equipment, computer and electronics, and hardware manufacturing. Equally, in the first quarter, there was positive growth in wood products and furniture manufacturing. However, it will be difficult to maintain this pace of growth, because, after last year’s record high, wood prices have started to fall, and this will restrict growth in the second half of the year.
Although Baltic manufacturers have, until now, shown surprising resilience against a reduction in external demand, and pre-emptive figures show that the situation in global manufacturing is stabilising, I am still cautious enough about this year in general, and I predict that growth in the manufacturing industry in the Baltics could be around 3% this year. The stabilisation of manufacturing indicators in external markets has been at a relatively low level, and unresolved trade wars, as well as other risks, could provoke a further decrease in activity. Meanwhile, manufacturing is usually a pre-emptive industry. Therefore, long-term low growth speeds could be promoted in other European industries, such as private consumption and construction, which would affect Baltic manufacturers much more significantly.
Under the influence of the global economy headwind, growth in the Baltics becomes more moderate
The external environment becomes less favourable and risks increase
Construction on the verge of overheating