Estonia: Economy grows faster than previously reported in the third quarter
December 9, 2010
Growth accelerated in the third quarter supported by strong exports. According to Statistics Estonia, gross domestic product (GDP) rose 5.0% over the same period last year, which was above the 4.7% expansion reported in the flash estimate on 11 November. The reading represented an improvement compared to the 3.1% expansion observed in the second quarter and marked the second consecutive quarter of positive growth, after more than two years of declining output. The third quarter reading reflected a solid recovery of exports, which was partially offset by an improvement in imports, fuelled by accelerating domestic demand. Private consumption rebounded to a 1.1% expansion (Q2: -3.2% year-on-year). Meanwhile, gross fixed investment contracted 10.3% over the same period last year, up from the 17.1% decline in Q2. In addition, domestic demand benefited from an increase in inventories, which contributed with 6.7 percentage points to overall economic growth. In the external sector, exports grew 24.0% (Q2: +18.0% yoy), fuelled by industrial products. Meanwhile, imports improved from a 23.0% expansion in Q2 to a 29.0% increase in the third quarter. As a result, the net contribution from the external sector to overall growth remained positive but deteriorated further from 0.9 percentage points in the second quarter to 0.4 percentage points in the third. A quarter-on-quarter analysis does not corroborate the acceleration suggested by the annual figures, as the economy expanded a seasonally and working day adjusted 0.7% over the previous quarter, which was well below the 1.9% expansion recorded in the second quarter. According to the Finance Minister, the recovery is likely to slow in the fourth quarter (due to a higher base effect) but confirmed that full-year growth will exceed the 2.0% expected in August.