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Analyst: Euro becoming stronger has small impact on Estonian economy

According to Swedbank's chief economist Tõnu Mertsina, the euro becoming stronger does not have a strong impact on Estonia's foreign trade and economy.

“A stronger currency is theoretically disadvantageous for export and makes import cheaper, but most foreign trade transactions in Estonia take place in euros,” Mertsina said on Swedbank’s blog, quoted by ERR News. “Last year, 11 percent of transactions in the export of goods and 13 percent in the import of goods took place in U.S. dollars.”

Mertsina explained that although the euro has become stronger in relation to the U.S. dollar by around 12 percent and i already at 1.18 at present, the euro is still currently weaker than its longer-term average. “For instance, the euro’s ten-year average exchange rate is around 1.30,” he noted.

According to the economist, the strengthening of the euro should only have a modest impact on Estonia’s exports, and in imports the impact will also not be very broad-based. “Stronger foreign demand has a bigger and more positive impact on exports,” he added.

In addition to the exchange rate, it is also important to observe the change in export and import price, Mertsina continued. “Both prices have been moving up as of last fall — with increasing speed last year, while this year the speed has slowed down, primarily due to the decelerating growth of the prices of shale oil products,” he said.

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