What Will Be the ‘New Normal’ in 2023 for Industry?

My interview for Tööstusuudised.ee (02.01.2023).
What are your thoughts on 2023, as a CEO? What could be in store for the economy, more specifically, for the industry sector? What is your baseline scenario?
Today's ‘new normal’ is that the environment keeps changing fast and entrepreneurs have to get used to constantly adapting quickly. This largely means looking for new markets and diversifying the portfolio across different products, segments and regions. Estonian goods and services are competitive in the world, and we need to grow our sense of self-worth in order to bring international transactions to a larger scale. This also means quickly finding alternatives in terms of raw materials. Those who have a good network on both inputs and outputs, and are adaptable, will win. I'm an optimist and a yes-person by nature, so closing some doors means opportunities elsewhere and we succeed as entrepreneurs if we can adapt to changing circumstances. Luck is needed too, of course.

Digitalization and climate issues are currently somewhere on the fringes of managers' minds, this should definitely change. Also, one's ability to break through is underestimated, especially in small and medium-sized and/or companies that create little added value. Enterprise Estonia’s programmes – our national business and innovation agency – and government support programs for entrepreneurs that support better planning, innovation, digitalization, climate-driven management decisions and breaking through to foreign markets are a good way to support the business climate. In addition, a safe tax environment, growing defense spending and the new government's continued ability to lead the conversation internationally, to raise Estonia's reputation and credibility is a must.

The ‘visibility’ of the economy, meaning its predictability, has decreased. One thing is certain though: the interest rate policy of the central banks has changed and the rates are moving in one direction today - there is no sign of a turn or a stop in this regard yet. Inflation remains very high and together with the high level and high volatility of energy prices, this puts pressure on the livelihoods of households as well as the competitiveness of businesses.

The Bank of Estonia estimated in its recent (December 20th) economic forecast that inflation in 2023 will be 9.3% and the figure for the year 2022 will be 19.4%. The question is whether I, as an entrepreneur, would dare to plan according to this prognosis today, considering that exactly a year ago, the BoE predicted a price increase of 6.9% for 2022 - the current situation and forecasts today differ not in percentages, but in multiples.

2023 is likely to be a difficult and volatile year for the economy and industry, but it will not affect all sectors and niches in the same way and as always there will be winners and losers. 2022 was difficult, but it is still worth looking at the future with optimism, even if there are some concerns. My baseline scenario is that an uncertain environment is the ‘new normal’.

How is KODA doing at the moment? What signals are coming from foreign markets and what does demand show?
Kodasema is a startup of architectural modular climate-aware spatial solutions and our focus is on construction innovation, scaling and digitalization. Kodasema is very busy and we expect growth in the coming year as well. KODA houses are in use in 15 countries on 3 continents. We have just expanded into the Australian market, which is currently our geographically furthest. Our KODA Loft ready-made house has been well received there and we have had a lot of positive feedback - for 2023 we expect further growth in interest and active sales Down Under.

There is a huge housing shortage in the world. I am confident that there is a market and a customer for well-designed, climate-aware and world-class engineered tiny houses even in difficult times and for this reason we are currently raising additional capital to intelligently accelerate growth.

2023 also means parliamentary elections in Estonia. As the head of a company, what do you expect from the new government?
I expect the same from the new government as from all governments - that they prioritize the long-term interests and goals of a democratic country. Estonia must be protected, we can ensure this in cooperation with our allies - Estonia must never be alone again. Estonia's interests must be protected in various international forums and behind these discussion tables it is important that Estonia's goals and interests are expressed in clear messages and with good foreign language skills. Estonia must be able to position itself in such a way that we participate in shaping the views of the Western worldview and leading the way in decision making in this part of the globe.

At present, industry heads are criticizing the government for not providing enough support, while other governments are determined to support their own industries. This worsens our competitive situation. How would you comment on this - should we support more or rather not?
Entrepreneurs and industry heads are primarily interested in one thing - to ensure equal competition and adherence to the agreed rules and values. What is equality anyway? Estonian industries are always is an unequal position when creating new relationships in export markets, compared to large well-known countries, simply because of our history. Estonian companies usually have to first ‘sell’ their country, themselves and only after that, their product or service.

As a small country, our capability to support individuals and companies is certainly not on the level of some other (larger) countries. It is the government's job to ensure that in the current difficult situation, we do not create a situation on a wider scale where, when the crisis is over, we discover that the competitive conditions for Estonian companies have become significantly worse, compared to those of other countries belonging to our common economic space.

Sector-by-sector differences in support may be necessary. For example, the importance of the Estonian food industry in food security, the local commodity market in general, also some energy-intensive industries. But each state still looks at the big picture by all expenditure categories. Subsidies are only one part of the budget. In this context, it is also important for entrepreneurs to understand the big picture, which is different for each country. Estonia is a neighboring country of Russia. More unity, more cooperation between different social groups and sectors. Less confrontation and division. More kindness and looking for common ground.

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