Estonia: Growth accelerates in Q4 2018
Detailed national accounts data released by Statistics Estonia on 1 March, showed that growth gained traction at the end of last year. GDP increased 4.2% on an annual basis in Q4, up from 4.0% in Q3 (previously reported: +4.2% year-on-year). Moreover, on a seasonally- and working day-adjusted quarter-on-quarter basis, the economy expanded 2.2% in the fourth quarter, up markedly from a meager 0.4% expansion in the previous quarter. For the year, however, annual growth moderated from 4.9% in 2017 to 3.9% in 2018.
The year-on-year acceleration in the fourth quarter was driven by a sturdier performance from the external sector. Exports growth accelerated to 4.9% in Q4 on an annual basis (Q3: +1.9% yoy), largely thanks to higher exports of computers, electronic and optical equipment. At the same time, imports growth moderated somewhat but remained elevated (Q4: +6.1% yoy; Q3: +6.6% yoy). As a result, the external sector’s contribution to GDP improved in Q4 compared to Q3.
Domestic demand, meanwhile, cooled slightly in the fourth quarter but remained robust overall, increasing 6.0%-year-on-year, up from 6.6% in the third quarter (previously reported: +6.3% yoy). Fixed investment spearheaded the expansion, surging 17.7% annually in Q4, up markedly from Q3’s 4.2% increase, driven by booming investment in buildings and structures, as well as machinery and equipment. In addition, household consumption growth remained upbeat in Q4, picking up slightly from the previous quarter’s increase (Q4: +5.0% yoy; Q3: +4.5% yoy), against the backdrop of tightening labor market conditions. Lastly, government spending recovered from two consecutive quarters of contraction and rose at the fastest rate in over two years in the fourth quarter (Q4: +2.2% yoy; Q3: -0.8% yoy).