Estonia GDP Q2 2016


Estonian economy slows considerably in Q2

In the second quarter, the economy expanded a modest 0.8% over the same quarter of the previous year, according to the revised data published by Statistics Estonia (SE) on 8 September. The print came in above the 0.6% reading reported in the flash estimate and marks a clear deceleration over the 1.5% increase recorded in the first quarter of the year. Q2’s deceleration was mainly driven by a negative contribution of the external sector to growth, which dragged down the solid performance of the domestic economy.

On the domestic side, growth in private consumption slowed from 3.8% in Q1 to 3.0%. Fixed investment swung from a 1.2% contraction in the first quarter to a strong 5.4% increase in the second quarter, marking the first expansion in eight quarters. The strong reading was supported by higher investments in dwellings, machinery and equipment. Government consumption, on the other hand, declined 0.1% in Q2 (Q1: -0.1% year-on-year). Overall, domestic demand expanded 4.9% in Q2, coming in above the 3.6% increase observed in Q1.

On the external side, exports of goods and services rose 4.1% in Q2 (Q1: +0.2% yoy) supported by higher sales of electronic products, electrical equipment, wood and wood articles in overseas markets. Growth in imports surged to 8.8% in the second quarter (Q1: +3.0%). As imports expanded at a faster rate than exports, the external sector’s net contribution to overall economic growth deteriorated from minus 2.4 percentage points in Q1 to minus 3.2 percentage points in Q2, the lowest print in over three years.

In seasonally- and working-day adjusted terms, GDP growth decelerated from 1.2% quarter-on-quarter in Q1 to 0.5% in Q2 (previously estimated: +0.3% quarter-on-quarter).

The Central Bank expects GDP growth to reach 1.8% in 2016 and 2.9% in 2017. FocusEconomics Consensus Forecast participants see the economy growing 1.9% in 2016, which is down 0.1 percentage points from last month’s estimate. In 2017, economic growth is expected to accelerate to 2.5%.

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Estonia GDP Chart

Estonia GDP Q2 2016

Note: Year-on-year changes of GDP in %.
Source: Statistics Estonia and FocusEconomics Consensus Forecast.

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