Estonia: Growth gains traction in the third quarter
November 30, 2018
The economy shifted into a higher gear in the third quarter, according to comprehensive data released by Statistics Estonia on 30 November. GDP expanded 4.2% in annual terms in Q3, accelerating from the previous quarter’s 3.8% growth, on the back of stronger domestic dynamics.
Domestic demand, underpinned by buoyant investment activity, was the engine of growth in Q3, expanding 6.4%-year-on-year in the quarter (Q2: +5.1% year-on-year). Fixed investment increased 4.2% annually, rebounding after two consecutive quarters of contraction (Q2: -0.6% yoy) amid stronger machinery and equipment investment and a booming construction sector. Meanwhile, household consumption lost some traction in the third quarter (Q3: +4.1% yoy; Q2 +5.2% yoy) as unemployment edged up and inflation remained somewhat elevated. Lastly, government spending fell for the third consecutive quarter to an over six-year low of -0.8% year-in-year in Q3 (Q2 -0.5% yoy).
The external side of the economy fared significantly worse in the third quarter than in the previous one. Exports growth slowed markedly in the third quarter (Q3: +0.8% yoy; Q2 +6.5% yoy), largely on the back of nearly stagnant exports of goods amid a wider slowdown in EU and global trade activity. Meanwhile, imports rose at a strong clip in the third quarter (Q3: +6.1% yoy), decelerating slightly from the second quarter’s 8.0% increase, driven by the sustained growth in imports of machinery and equipment.
On a seasonally- and working day-adjusted quarter-on-quarter basis, the economy expanded 0.4% in the third quarter, decelerating from a strong 1.4% expansion in the previous quarter.
Author: Almanas Stanapedis, Economist