Estonia's economy is gradually picking up, as the last quarter of the previous year saw slight growth for the first time in over two years. This sets the stage for a modest economic expansion by the end of this year.

The crisis of recent years has had a significant impact on BLRT, the largest industrial group in the Baltic region, particularly its engineering division.

"Overall, things turned out positively — the company ended the year with a profit. However, if we look at recent years, both revenue and profit have declined noticeably. A key reason for this is that we operate 100 percent in the German market and we all know the current situation in Europe," explained Priit Lind, head of BLRT Masinaehitus.

Lind does not expect a significantly better year for the BLRT Group in 2024. "Every company — whether in offshore industries, shipbuilding or ship repair — is struggling. Everyone is making an effort and it is difficult for all of us. But I would like to say, somewhat optimistically, that we will manage."

Bolt, the ride-hailing, car rental and scooter-sharing company, has continued to expand its operations every year.

"Last year, we added about 50 million customers worldwide, meaning we launched in more than 100 new cities. In total, we now have over 200 million customers globally, operating in more than 600 cities across more than 50 countries," said Henri Arras, Bolt's head of development.

According to Arras, Bolt is likely Estonia's largest services exporter. Companies in the services sector generally feel that the situation is improving.

"We have hit rock bottom, but Estonia's economy has finally emerged from the negative, at least based on quarterly statistics. This is, of course, a very good and encouraging sign for Estonians," Arras said.

In the fourth quarter of last year, Estonia's gross domestic product (GDP) grew by 1.2 percent compared to the same period in 2023, ending a 10-quarter downturn. According to Bank of Estonia economist Rasmus Kattai, signs of economic recovery had already been evident by mid-last year.

"The most important factor is that our manufacturing industry — the sector that produces goods for export — has likely overcome its most challenging period. Since the middle of last year, the subsectors within manufacturing that suffered the most during the preceding crises have strengthened and started to increase their production volumes," Kattai explained.

For Estonia's open economy, exports are crucial. Kattai noted that signs of recovery were visible as early as last year, with goods exports increasing by 4.9 percent and services exports growing by an even higher 7 percent.

"We have managed to climb out of a deep hole in terms of exports. The surge in costs and the loss of competitiveness that hurt Estonia's economy in 2022 and 2023 are now in the past. Estonian exporters have regained the ability to sell their products in larger volumes on foreign markets," Kattai said.

Minister of Economic Affairs and Industry Erkki Keldo (Reform) highlighted last year's record performance in the tourism sector. Additionally, the decline in the Euribor rate will leave Estonians with €400 million more in disposable income this year. However, Keldo acknowledged that tax hikes will offset some of this gain.

"Security also requires investment. However, these taxes are not disappearing from the economy — they are channeled into the state budget, which funds various services and initiatives. If we look at last year, business confidence indicators across all major industries and sectors improved throughout the year," the minister said.

Last year, analysts predicted a modest economic growth of 1 to 2 percent for Estonia in 2024. However, actual performance may not be as strong.

"A concrete example: right now, we don't yet know what will happen with potential U.S. tariffs and trade duties. That is one factor that was not accounted for in previous forecasts and could impact the final outcome," Keldo noted.

According to Statistics Estonia, the country's economy grew by 1.2 percent in the final quarter of last year, marking the end of a 10-quarter (or two-and-a-half-year) recession. The last time economic indicators were in positive territory was in early 2022. The lowest point of the downturn came at the beginning of 2023, though the depth of the decline was not as severe as in previous crises.

The fastest-growing sector was energy, which expanded by 21 percent, followed by real estate and information and communications. Manufacturing also remained in positive territory, increasing by 0.5 percent. However, the construction sector continues to struggle, posting a 12.9 percent decline.

Inflation remains relatively high. In February, prices were 5.3 percent higher than a year earlier. The peak of inflation occurred in the second half of 2022 and the first half of 2023, but it has not dropped below 2 percent since.

--

Follow ERR News on Facebook and Twitter and never miss an update!