Estonia: GDP records best reading since Q1 2022 in Q2
Economy grows for the first time in a year: GDP rebounded in the second quarter, increasing 0.9% year on year, above the 0.7% contraction tallied in the first quarter. Q2’s figure marked the best result since Q1 2022 and the first expansion in a year. On a seasonally adjusted quarter-on-quarter basis, economic growth improved to 0.6% in Q2, following the previous quarter’s 0.2% expansion and marking the best result since Q4 2021.
Domestic demand fuels recovery: Domestically, private consumption growth rebounded, growing 0.9% year on year in Q2, after a 0.8% decline in Q1. Moreover, government spending sped up to a 2.4% expansion in Q2 (Q1: +1.3% yoy). Together, these factors compensated for a drop in outlays; fixed investment was down 0.3% in Q2, contrasting with the 4.3% expansion in the prior quarter.
On the external front, exports of goods and services growth moderated to 1.6% in Q2 (Q1: +6.2% yoy). In addition, imports of goods and services growth waned to 2.4% in Q2 (Q1: +5.7% yoy).
Panelist insight: EIU analysts said:
“We forecast that real GDP growth will accelerate […] in 2025, following three years of flat or negative growth in 2022-24. […] Private consumption growth will rebound in 2025, reflecting solid real wage growth and declining interest rates easing the pressure on real household disposable incomes. However, a stronger rise in consumer spending will be prevented by inflation still remaining high compared with historical averages. Government consumption will make a positive contribution to growth. However, this impact will be somewhat limited by the government prioritising military spending rather than stimulative spending elsewhere.”