Estonia Current Account Balance (EUR bn)

Current Account Balance in Estonia

Following Q4’s contraction, the economy likely shrank for the fourth consecutive quarter in Q1 2023, albeit at a softer pace. In January–February, industrial output continued to decline, though more slowly than in Q4, as producer price inflation eased to the lowest rate since Q2 2021 in Q1. Less positively, private spending likely weakened further, with retail sales in January–February dropping at a faster pace than in the prior quarter. However, less downbeat economic sentiment in March may have supported spending in the final month of the quarter. Meanwhile, on the external front, exports and imports both declined in January–February on average, pointing to subdued foreign and domestic demand. In other news, in April, the newly appointed government announced plans to raise the VAT and excise taxes from 2024 onwards to reduce the fiscal deficit. The proposal has faced widespread criticism.