Manufacturing like a hipster – the more difficult, the more challenging

This can also be said about manufacturing – despite restrictions and the rapid spread of the virus, the sector has expanded during the crisis.

Thus, in the fourth quarter the manufacturing output grew by 2.4% compared to the third quarter, which was warmer and less affected by Covid-19, and even by 3.7% compared to the respective quarter of the previous year.

Given the major drop in its output during the first wave of the pandemic, manufacturing contracted by 1.2% overall in 2020.

Chart 1. Manufacturing output (year-on-year; %; contribution; percentage points) and industrial sentiment (%)

When it comes to investments in manufacturing over the past five years, a period that was relatively favourable for the economy, they have been, regrettably, much lower than those reported by Estonia and Lithuania. Without the successful leaps in the production volumes of individual sectors, the situation would seem quite stagnant.

According to a survey of the European Investment Bank [2], 2020 saw something like a revolution in terms of digitalisation, supply chain restructuring and the range of products and services available on the market. So far, the hipsterly approach has been confirmed.

It should be noted, however, that the manufacturing story is not so straightforward since the wood industry plays an important role in the sector. In 2020, wood industry was in a more favourable position owing to higher prices and demand as well as due to the fact that the little mischief-maker, the European spruce bark beetle, caused less damage. At the same time, the impact of the pandemic is also evident as the restrictions and remote work have facilitated the popularity of the DIY segment. Many people rushed to improve their homes with new floorings, cabinets, saunas and other practical and recreational features.

Some other sectors have also proven their ability to withstand a storm: manufacture of electrical and other equipment, printing, manufacture of rubber and plastic products and manufacture of parts for motor vehicles as well as unknown sectors or, in other words, sectors not disclosed for reasons of confidentiality (i.e. we do not know whether it is manufacture of pharmaceutical products, manufacture of computer and electronic products or manufacture of other transport equipment). Credit also goes to all those who have managed to turn challenges into opportunities and find new markets, products, digital solutions and other resourceful ways to survive and maybe even overtake their competition.

What can we expect in the future? The year has already begun with major restrictions and challenges. If we manage to use this time to further improve and digitalise our work processes as well as use the available increased European Union funding for innovation and modern factories, it could be a good stepping stone for the sector to becoming a major driver not only in times of crisis but also in more favourable times.

[1] "Hipsters are people that try too hard to be different (and genuinely do think that they're being different), by rejecting anything they deem to be too popular." Source: Urban Dictionary: hipster

[2] You can learn more about investment and the survey results at the webinar "Investment and Investment Funding in Latvia", jointly organised by the European Investment Bank and Latvijas Banka (11 February 2021; scheduled to start at 15:00 p.m.). The webinar will be held in English on the Webex platform. To participate in the webinar, we kindly ask you to register on the website of the European Investment Bank by 10 February via the following link: Registration – Investment and Investment Finance in Latvia (cvent.com)