Estonia: Economy bounces back to growth in the first quarter of 2021
GDP rose 5.4% year-on-year in the first quarter of 2021, rebounding from the 1.2% drop logged in the prior quarter and marking the first return to growth after four consecutive quarters of contraction.
Q1’s bounce-back was mainly led by government spending, which rose 7.2% in annual terms in the quarter (Q4: +4.8% yoy) and marked the strongest increase in over 13 years. Meanwhile, fixed investment grew an impressive 54.7%, although it eased from the previous quarter’s 71.4% surge. Lastly, household consumption declined for the fourth consecutive quarter at 3.3% annually (Q4: -1.3% yoy), as persistent restrictions throughout the period capped spending.
On the external front, exports of goods and services rose 4.0% annually in Q1, slowing somewhat from Q4’s 4.2% increase. Similarly, imports jumped 20.5% year-on-year, likely bolstered by strong investment activity, but eased from the prior quarter’s 24.7% jump.
On a seasonally-adjusted quarter-on-quarter basis, economic activity climbed 4.8% in Q1, quickening from the 2.8% increase logged in the previous quarter.
GDP growth is projected to average around current levels this year, following 2020’s pandemic-induced contraction. Firming foreign demand should bolster the external sector, while households and businesses are set to continue spending as restrictions are further lifted. That said, uncertainty around the development of the health crisis dampens the outlook.