As of March, none of the respondents considered the situation to be "good"; 61 percent rated it "satisfactory," and 39 percent rated it "poor."

The institute's first-quarter report showed that, compared with December 2024, the proportion of those who considered the state of the Estonian economy to be "satisfactory" rose, while the number of those who viewed the situation as "poor" fell.

The investment situation is considered satisfactory by 56 percent and poor by 44 percent of respondents, but in this area, too, no expert deemed the situation to be good.

Investment outlook behind the curve

The investment picture is, however, slightly worse than the overall economic situation, though somewhat better compared with the assessments given in December.

Institute of Economic Research director Peeter Raudsepp noted that, according to experts, the economic climate indicator has returned to a satisfactory level for the first time in three years, even as the current economic situation is still assessed as poor.

Raudsepp said: "The gradual improvement of indicators describing the economic situation supports higher expectations for the future. A situation where all economic confidence and sentiment indicators remain below the long-term average could be improved by real government actions aimed at enhancing the business environment and consumer conditions."

Experts foresee the economic situation improving within the next six months, that is, by September, or at least 56 percent of respondents believe so, while 44 percent think the situation will remain the same by the end of that time frame, though no worse.

Whereas in December's survey, 5 percent of respondents said they believed that the situation would worsen in the next six months, i.e., by June this year, no respondents predict any actual deterioration of the economy in the next half-year.

The economic confidence index, which combines the views of entrepreneurs and consumers, stood at 90.9 in March — significantly worse than the long-term average but has remained roughly at the same level over the past half year.

Compared with the previous survey, experts' expectations on the investment situation have fallen: Thirty-three percent believe the situation will be better in six months, while the remaining 67 percent think it will remain unchanged.

Some improvement seen in foreign trade

In the case of private consumption, 72 percent of experts said they believe the current situation will persist as is after six months, 11 percent expressed hope for improvement, and 17 percent said they expect a deterioration.

Respondents did, however, rate the outlook for foreign trade to be positive. A total of 61 percent believe volumes will be larger in six months' time, 33 percent say they will remain the same, while 6 percent predicted a decline.

Inflation assessments show that 33 percent think it will be higher in six months, with 56 percent believing there will be no change and 11 percent expecting it to have fallen.

Forty-five percent of experts said they think stock prices will be at the same level in six months as they are now, 33 percent expect them to rise, and 22 percent expect a fall here.

Main challenges: Low innovation, competitiveness, trust in government

Experts considered the most significant issues facing the economy to be a lack of innovation, low international competitiveness, a lack of trust in government economic policy, insufficient demand, and a shortage of skilled labor.

Compared with the situation a year earlier, the assessed average severity of these problems remained at the same level in March 2025.

According to Raudsepp, attention must, however, certainly be paid to the decline in purchasing power caused by the rapid hikes in taxes and prices, which has worsened the financial situation for an increasing number of families and keeps consumer confidence notably low.

"The stabilization and slight improvement of the economic situation is good for the future. Our near-term developments are most influenced by global economic instability, the soon-to-be-enforced tax increases, and rapid price growth burdening our consumers," Raudsepp said.

Meanwhile, the industrial barometer, based on the opinions of several hundred manufacturing companies, revealed that demand for output remains below normal, staying roughly the same as three months ago. Entrepreneurs' forecast for the next three months is positive, and confidence has strengthened.

Improvement in construction

The construction barometer, based on the assessments of over a hundred construction companies, showed improving prospects, however.

The confidence indicator is on the rise and slightly better than a year ago. Over the next three months, the volume of construction work is expected to gradually increase.

The retail confidence indicator remains negative, as retailers expect sales figures to improve over the next three months, but it still stays in the negative.

Half of the stores believe product prices will rise in the next three months, and 70 percent of food stores anticipate price increases. A quarter of all stores plan to reduce their number of employees.

In the service sector, the confidence indicator continued to rise and was higher than a year ago. The decline in service sales continued in recent months, but for the next three months, companies forecast growth in sales.

Consumer confidence in March of this year was at the same level as a year ago and significantly below the long-term average, but the negativity has slightly decreased over the past month and families are, albeit relatively, more hopeful about the future.

In March, 63 percent of families assessed that their household's economic situation had worsened over the past year, 26 percent said it remained unchanged, and 10 percent said they were in a better economic position.

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