Economist: Too soon to be talking about a turnaround in the Estonian economy
Freshly announced economic growth rates for the first quarter of the year are nothing to shout about, Luminor bank chief economist Lenno Uusküla said Friday.
The Estonian economy is in a continuing slump, and the growth rates are very small, not even close to the dimensions of the preceding decline, Uusküla continued.
The situation is nowhere near the position Estonia hoped in 2022 to have reached as of today, Uusküla went on.
"This minor economic growth concerns only certain sectors, and in many there has been a decline, so it is too early to talk about a turnaround in the economic cycle," said Uusküla. "Although confidence for making investments is slowly improving, the level is still low, and this does not give certainty regarding future growth potential."
The economy grew by 0.6 percent on year to the second quarter of 2025, new data from Statistics Estonia shows-
However, when taking into account seasonally and working-day adjusted GDP numbers, the growth is 0.5 percent, Uusküla said, while if using unadjusted numbers, the economy grew by 0.9 percent on year to Q2 2025.
As for the causes of this modest growth, it "has been brought about by private consumption. Spending rose during the year on insurance and financial activities, information and communications, leisure, sports, culture, and home furnishings," Uusküla said.
The level of investments has slightly fallen over the year, the Luminor economist went on. While investments by financial companies and the public sector have grown, both by around 10 percent, non-financial companies' investments have fallen by 8.1 percent over the year.
"This low level of investments remains a continuing concern when thinking about future growth prospects. Estonia's export of goods has grown by 1.6 percent on the year. But since the growth of imports has been higher, the overall effect of foreign trade on economic growth has been negative," Uusküla noted.
The distribution between economic fields is also, according to Uusküla, highly uneven. The energy sector has been growing, as has real estate activity, and growth has also somewhat been seen in education, professional, scientific and technical activities, public administration, and arts and entertainment. By contrast, a fall has been seen in annual comparison when it comes to construction, transportation and warehousing, health care, and agriculture.
Growth was also significant in net production taxes.
The new Q2 2025 figures announced Friday represented the first, albeit modest, quarter the economy in Estonia has grown for a year, i.e. since Q2 2024.
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Editor: Andrew Whyte
