Estonia: GDP growth accelerates in Q4
February 28, 2018
According to data published on 28 February, Estonia’s economy ended 2017 on strong footing, expanding 5.0% annually in the fourth quarter. The print was notably up from Q3’s 4.2% growth but fell short of the multi-year high of 5.7% logged in Q2, while also marking the second-strongest quarterly expansion in the period after Q2 2012. As a result, in 2017 the economy grew 4.9%, more than double the rate achieved in 2016, and the fastest GDP expansion in six years.
Tightening labor market conditions, coupled with higher employee productivity levels and rising wages, fueled domestic demand in Q4. Despite slowing from the previous quarter, annual growth in private consumption remained elevated, coming in at 2.8% (Q3: +3.5% year-on-year). Government consumption growth accelerated in the fourth consecutive quarter, although it remained modest at 1.5% (Q3: +0.9% yoy). Meanwhile, fixed investment growth fell to 5.8%, significantly below the third quarter’s outstanding 13.2% expansion, and the lowest reading in 2017. In turn, domestic demand growth moderated from Q3’s 6.9% to 4.5% in Q4, still above the average quarterly reading for the year.
Exports accelerated in Q4 to 3.4% growth, more than double the rate recorded in the previous quarter (Q3: +1.5% yoy). Meanwhile, growth in imports outpaced the increase in exports, pushing the trade deficit up at the end of the year. Imports grew 4.2% in Q4 (Q3: +4.4% yoy), largely on the back of higher domestic demand for vehicles, chemicals and chemical products, electrical equipment.
On a quarter-on-quarter basis, the economy expanded robustly in Q4, growing 2.2% in the fourth quarter, notably up from a 0.3% expansion in the previous quarter, and marking the highest print in over seven years.
Author: Almanas Stanapedis, Economist