TALLINN - The coronavirus pandemic may give rise to hidden protectionism in the export markets of Estonian food industries, it appears from a report by the Foresight Center of the parliament.
The first virus wave saw monthly revenues drop 20.6 percent in the manufacture of beverages while food production underwent the largest decline in April, decreasing 6.9 percent.
"The food industry has coped well with the coronavirus pandemic and remained relatively stable," Foresight Center expert Uku Varblane said. "The impact of the crisis first manifested in food production in the form of a shopping frenzy, followed by a decline in April; however, monthly revenues bounced back quickly. Businesses in the manufacture of beverages were experiencing more difficulties as their monthly revenues fell by one-fifth in April and have yet to fully recover."
The food sector experienced marketing problems as a result of drops in sales to hotels and restaurants, which in some cases caused circular debts between businesses, Varblane said.
"The dry matter sector fared well at the start of the crisis; however, it may be looking and a drop in sales as people are now consuming the stocks they have built. Producers of confectionery took a big hit in the crisis because a large share of their market disappeared due to the closure of cafes and restaurants," he noted.
Food industries are facing the second wave of the virus in a relatively good condition; however, there is much uncertainty with regard to many aspects in production.
"For instance, further spread of the virus, decisions regarding foreign workforce, rise in unemployment, which may entail a drop in consumption, and the obligations stemming from the European green transition," Varblane said, adding that an increase in protectionism in export markets is becoming a risk.
"The origin of food is highlighted increasingly often as a result of the crisis, and thus a negative backdrop is created for import goods, which also worsens Estonia's options for export," the expert said. "Small states stand to lose most from protectionism as they don't have any famous food brands known and bought by everyone."
Food and drink industries provided employment to 2.9 percent, or 16,000 people, among workers in Estonia. 1.9 percent of total value added in the economy was generated in the sector, equaling 458 million euros at current prices. The production of food and beverages accounts for 2.8 percent of Estonia' export.
Estonian food producers' monthly revenues dropped up to 6.9 percent on year in April due to the virus crisis and grew 4.2 percent on year in June. Beverage manufacturers also saw their biggest drops in revenue in April when the year-over-year decline amounted to 20.6 percent.
According to the Forecast Center's coronavirus resilience index, food and beverage production places fourth among a total of 17 economic sectors with 1.8 points.
The COVID-19 resilience index assesses the relative extent to which various economic sectors are affected by the virus crisis on the basis of businesses' economic indicators on a scale from -5 to +5 points.
Year-on-year changes in summary turnover for March-August 2020 carry the most weight in the index, with changes to the number of employees on year and dynamics following the spring emergency situation also taken into account. The index also takes into account changes in labor costs and in the companies' profit and investments compared with the same period last year.
The Foresight Center is a think tank at the Estonian parliament; its tasks include analyzing long-term developments in the society, identifying new trends and development avenues, and drafting development scenarios.