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Estonia Economic Forecast

Estonia Economic Outlook

In Q4, annual GDP contracted for the third consecutive quarter and at a steeper pace than in Q3. Private consumption weakened due to double-digit inflation and deeply entrenched consumer pessimism, while exports fell at the fastest rate since Q2 2020 amid weaker global demand. However, surging growth in fixed investment prevented a deeper slump. In Q1 2023, the economy likely continued to wane. In January, industrial output contracted for the eighth successive month, dented by still-elevated producer inflation hitting all sectors. Private spending also likely deteriorated: Retail sales in January fell at their fastest pace since April 2020. Meanwhile, Prime Minister Kaja Kallas’ center-right coalition won an overwhelming majority in the 5 March elections, emphasizing the country’s pro-EU and anti-Russia stance.

Estonia Inflation

In February, harmonized inflation fell to 17.8% from January’s 18.6%. Weaker price pressures for food and transport drove the moderation. This year, inflation should more than halve on cooling domestic demand, lower commodity prices and a high base of comparison. That said, it will remain well above the ECB target. Energy price increases pose an upside risk.

Estonia Economic Data

2017 2018 2019 2020 2021
Population (million) 1.3 1.3 1.3 1.3 1.3
GDP (USD bn) 26.9 30.6 31.1 31.3 37.2
GDP per capita (USD) 20 23 23 23 27
GDP (EUR bn) 23.8 25.9 27.8 27.5 31.4
GDP per capita (EUR) 18 19 20 20 23
Economic Growth (Nominal GDP, ann. var. %) 9.6 8.8 7.1 -1.1 14.5
Economic Growth (GDP, ann. var. %) 5.8 3.8 3.7 -0.6 8.0
Domestic Demand (ann. var. %) 5.2 6.1 1.7 6.2 6.4
Private Consumption (ann. var. %) 2.3 4.7 4.4 -1.2 6.5
Government Consumption (ann. var. %) 1.9 1.1 3.1 2.8 4.0
Fixed Investment (ann. var. %) 13.9 10.5 -3.7 24.7 2.8
Exports (G&S, ann. var. %) 4.8 2.9 6.1 -5.3 19.9
Imports (G&S, ann. var. %) 4.0 5.9 3.8 0.4 21.0
Industrial Production (ann. var. %) 4.0 4.9 7.1 -2.8 12.8
Retail Sales (ann. var. %) 1.7 1.1 4.4 3.5 11.8
Wages (ann. var. %) 6.8 7.6 7.5 2.9 6.8
Unemployment (% of active population, aop) 5.8 5.4 4.5 6.8 6.2
Fiscal Balance (% of GDP) -0.5 -0.6 0.1 -5.5 -2.4
Public Debt (% of GDP) 9.1 8.2 8.5 18.5 17.6
Money (ann. var. of M2 %) 5.8 10.5 9.5 19.4 20.2
Inflation (CPI, ann. var. %, eop) 3.4 3.4 1.8 -0.8 12.2
Inflation (HICP, ann. var. %, eop) 3.8 3.3 1.8 -0.9 12.0
Inflation (HICP, ann. var. %, aop) 3.7 3.4 2.3 -0.6 4.5
Inflation (PPI, ann. var. %, aop) 3.6 2.6 -0.2 -2.4 12.4
Exchange Rate (USD per EUR, eop) 1.20 1.14 1.12 1.22 1.14
Exchange Rate (USD per EUR, aop) 1.13 1.18 1.12 1.14 1.18
Current Account Balance (EUR bn) 0.5 0.2 0.7 -0.3 -0.6
Current Account Balance (% of GDP) 2.3 0.9 2.4 -1.0 -1.8
Merchandise Trade Balance (EUR bn) -0.9 -1.2 -0.9 -0.2 -1.3
Merchandise Exports (EUR bn) 12.0 12.6 13.3 13.3 16.4
Merchandise Imports (EUR bn) 12.9 13.8 14.2 13.5 17.7
Merchandise Exports (ann. var. %) 6.5 5.3 5.8 -0.2 23.2
Merchandise Imports (ann. var. %) 6.8 7.4 3.1 -5.0 30.5
Foreign Direct Investment (EUR bn) 1.6 1.3 2.8 2.8 0.9
External Debt (EUR bn) 19.9 20.2 21.1 24.4 26.6
External Debt (% of GDP) 83.4 77.9 76.1 88.8 84.7

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