Country Report Estonia
- ID: 2114012
- November 2015
- Region: Estonia
- 67 Pages
- The Economist Intelligence Unit
In the second quarter of 2015 Estonia's GDP increased by 2% year on year and by 0.7% quarter on quarter, according to Statistics Estonia. On the demand side, the main driver of growth was consumer spending in April-June. On the supply side, it was the property sector, agriculture and domestic trade. Since then, retail growth has remained on an upward trend, while manufacturing growth has continued to weaken. We estimate real GDP growth of 2% in 2015, and forecast only a modest pick-up next year, with more favourable external conditions only materialising for Estonia from 2017.
In the second quarter real consumer spending continued to grow quickly, by 5.4% year on year, well above the quarterly average of recent years, backed by ongoing improvements in the labour market, including rapid real wage growth against a background of enduring modest deflation. Into the third quarter growth in retail sales volumes remained strong, at above 8% year on year, pointing to the continued strength of household spending. Nonetheless, real domestic demand fell in the second quarter of 2015 for the first time since the second quarter of 2013. This was mainly explained by a fall in fixed capital investment and a drawdown on inventories.
In line with the upward trend in private consumption, domestic trade picked up strongly in April-June, by 5.8%, after a weak start to the year. The relatively small agricultural sector also grew rapidly, by 15.4%, up from 5.9% in January-March, although a strong middle period of the year could presage a weak final quarter, tempering the sectoral growth rate for the year.