Statistics Estonia Lead Analyst Riin Kadarik said manufacturing output continued to decline in March. According to Kadarik, the drop in volumes was mainly driven by a 4.1 percent decrease in food production.

"Food production has declined year on year for three consecutive months — by 6.9 percent in January and 5.3 percent in February. The main reasons are the continued decline in retail sales volumes and demand, combined with rising prices," Kadarik explained.

Output increased in slightly more than half of the manufacturing sub-sectors. Among larger industries, wood processing rose by 5 percent, fabricated metal products by 3.5 percent, and the manufacture of computers, electronics and optical equipment by 12.6 percent.

Growth in computer, electronic and optical equipment production was mainly due to increased output of communications equipment. The manufacture of electrical equipment also continued to grow by 0.7 percent.

In March 2026, 68.6 percent of total manufacturing output was sold to foreign markets.

Luminor economist: Estonia lagging behind

Luminor bank's Chief Economist Lenno Uusküla said annual declines can be seen across consumer, durable and capital goods.

"The largest decline has been in durable goods, where the decrease is over 8 percent," Uusküla said. "Year on year, the food industry contributed to the decline, with volumes 4.1 percent lower than a year earlier. The growth wave of 2023–2024 has passed, and over the past three months volumes have fallen back close to earlier levels. At the same time, there have been short-term declines before, and it is still too early to say whether this is a coincidence or a new trend."

"Manufacturing volumes have improved slightly compared with the low point of 2024, but growth since then has been only a couple of percent, and output remains more than a tenth below the 2022 peak," Uusküla noted.

Some companies that traded with Russia have disappeared permanently, while the business of others might return if the political situation changes, he added.

"Input prices and wages have risen so much that a large share of this production is unlikely to return to Estonia. There is also a lack of electricity and little certainty that sufficient electricity will be available in the future to plan large-scale investments at a time when industry is facing full electrification," Uusküla said. "In recent years, there has been a major shift in industrial policy across Europe, with selected companies and their investments being supported to encourage them to continue or start operations. In this comparison, Estonia is playing catch-up and, given the overall geopolitical situation, is in a very weak position."

SEB: Industry struggling to find its footing

SEB bank's Economic Analyst Mihkel Nestor commented that industrial production volumes have been weak for quite some time. However, he noted that despite the March decline and an uncertain external environment, survey data have shown growth in new industrial orders.

"In the coming months, this should at least partially translate into actual production volumes," Nestor said.

"For Estonian exporters, the Finnish and German markets remain difficult, mainly because of very slow economic growth in both countries. The outlook for Sweden and Poland is somewhat more optimistic. The latter, in particular, is increasingly coming into focus for Estonian companies, and last year 5 percent of exports of goods produced in Estonia already went there," Nestor explained.

Overall, the situation for industry remains challenging. "Growth in the sector's value added has been low for years, which means that manufacturing may lose its position as Estonia's largest economic sector in the coming years," Nestor said.

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