BOFIT Weekly Review 2016/48
Finland’s exports to Russia shrank further
The value of Finnish goods exports to Russia was down 8 % y-o-y in 3Q16, and down 3 % y-o-y for September. Machinery & equipment and chemicals form the majority of exports. Exports continued contracting in nearly all main product categories mainly due to reduced Russian demand and the weak ruble. The direct impact of EU export restrictions is limited, as they concern just 0.5 % of exports. The share of food items subject to Russia’s import bans was about 5 % of exports to Russia before the ban, but now exports of such food items have nearly ended. President Putin recently said that the import bans should be kept in place as long as possible.
There are small signs of recovery in exports of tourist services, with the number of overnight hotel and inn stays of Russian visitors to Finland showing annual growth in September – the first rise in nearly three years. The number of border crossings to Finland via the eastern border, however, has continued to fall slightly. For the second quarter, total services exports to Russia were still down over 30 % y-o-y.
Latest survey by the Finnish-Russian Chamber of Commerce finds that 40 % of Finnish companies that operate in or export to Russia expect their sales in Russia to increase over the next six months. Only 10 % said they anticipate a further contraction. Especially exporting firms but also firms operating in Russia consider the ruble as their main problem.
The latest Team Finland survey reports that Finnish firms are encountering trade barriers most often in Russia. The number of obstacles reported for Russia was more than twice higher than for China, which had the second highest reporting of trade barriers. Russia’s share of trade barriers has also grown (partly due to sanctions). Problems with customs procedures were the most cited trade barriers for Russia.
The value of Finnish goods imports from Russia contracted in the first nine months of 2016 by 2 % y-o-y. In September, it was at the same level as a year ago. Crude oil accounted for the bulk of imports. Services imports in 2Q16 were at about the same level as a year earlier.
Finnish goods exports to Russia in 2015 were €3.3 billion and services exports €1.2 billion. Both contracted 30 % y-o-y. Goods imports from Russia amounted to €5.6 billion and services imports €0.6 billion. Russia represented nearly 6 % of Finnish goods and services exports and 8 % of imports.