Estonia: GDP growth records best reading since Q4 1997 in Q2, partly supported by a favorable base effect
August 31, 2021
GDP growth gained traction to 12.9% year-on-year in the second quarter, from 4.1% in the first quarter. Q2's reading marked the best result since Q4 1997, albeit largely flattered by a favorable base effect, as one year prior the economy was enduring the worst phase of the Covid-19 emergency. That said, the print was comfortably above pre-pandemic levels.
The upturn reflected improvements in private consumption, fixed investment and exports. Private consumption growth rebounded, growing 12.4% year-on-year in Q2 compared to a 2.5% expansion in Q1, with higher spending on transport, clothing and footwear, and leisure and entertainment leading the uptick. Fixed investment growth accelerated to 60.0% in Q2, from the 53.5% increase in the prior quarter, amid solid capital spending in transportation equipment, machinery and buildings and infrastructure. Government spending growth, meanwhile, grew at the slowest pace since Q1 2021, expanding 2.6% (Q1: +6.9% yoy).
On the external front, exports of goods and services improved to 32.3% year-on-year in the second quarter, which marked the best reading since Q1 2007 (Q1: +4.0% yoy). In addition, imports of goods and services growth sped up, growing 54.9% in Q2 (Q1: +21.3% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth gathered steam, picking up to 4.3% in Q2, following the previous period's 3.9% increase.
Author: Frederico Teixeira de Abreu, Junior Economist