Estonia: Economy gains momentum in Q1
June 9, 2011
In the first quarter, GDP grew 8.5% over the same period last year, the fastest expansion since the first quarter of 2007. The result was above the 8.0% expansion reported in the flash estimate and represented an acceleration compared to the 6.7% rise in the fourth quarter. In fact, economic growth has been accelerating for four consecutive quarters after the economy contracted in 2008 and 2009. Domestic demand led the economic expansion in the first quarter. Private consumption more than doubled the pace from a 2.6% expansion in the fourth quarter to 5.4% in the first, while fixed investment growth remained broadly unchanged in Q1, adding 12.0% (Q4: +11.9% year-on-year). Government consumption rebounded from a 1.4% decline in the fourth quarter to record a 1.4% increase in the first. Although exports remained resilient in the first quarter, imports accelerated notably in Q1, resulting in a negative net contribution from the external sector to overall economic growth. Exports of goods and services increased 38.9% in the first quarter (Q4: +36.5% yoy), while imports expanded 38.5% (Q4: +30.0% yoy). As a result, contribution from external sector to economic growth fell from 4.0 percentage points in the fourth quarter to minus 1.6 percentage points in the first. At the sector level, the first quarter expansion was mainly driven by a soaring industrial sector, which grew 22.5% in Q1, bolstered by manufacturing. Positive developments in construction contributed to growth in services, which added 4.7% in the first quarter, up from the 4.1% increase in the fourth. On the other hand, agriculture declined 1.0% in Q1 (Q4: -1.7% yoy). A quarter-on-quarter figure does not reflect the acceleration implied by annual figures, as the economy expanded a seasonally and calendar-day adjusted 2.4% over the previous quarter, which was virtually unchanged from the 2.5% increase recorded in the fourth quarter.