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Estonia GDP Q4 2023

Estonia: Economic downturn persists in Q4

GDP declined by 2.7% year on year in the fourth quarter, unchanged from the third quarter’s plunge. That said, Q4’s reading marked the joint-best result since Q3 2022. On a seasonally adjusted quarter-on-quarter basis, GDP contracted 0.7% in Q4, compared to the previous period’s 0.8% fall. Consequently, the economy contracted by 3.0% over 2023 as a whole, which marked the sharpest downturn since 2009.

Looking at the details of Q4’s release, private consumption bounced back, growing 0.5% year on year. The result was the best since Q2 2022 (Q3: -2.2% yoy) and came on the back of lower inflation and a lower unemployment rate. Additionally, government consumption rebounded, growing 2.0% in Q4 (Q3: -1.1% yoy). Meanwhile, fixed investment worsened, contracting 0.4% in Q4, contrasting the 13.4% jump logged in the previous quarter. On the external front, exports of goods and services remained in contraction, falling 9.0% year on year in Q4 (Q3: -9.9% yoy). Meanwhile, imports of goods and services slid at a steeper rate of 6.6% in Q4 (Q3: -3.7% yoy).

The economy is set to rebound in 2024 on recoveries in household spending and fixed investment, coupled with stronger public spending growth. Nevertheless, the external sector will continue to struggle, with prolonged downturns in Nordic economies set to weigh on the industrial sector and exports this year. Quicker-than-expected monetary policy loosening by the European Central Bank is an upside risk, while the delayed absorption of EU funds is a downside risk.

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