Strong beginning of 2019 exceeded expectations

Strong beginning of 2019 exceeded expectations

Economic growth remained very strong at the beginning of 2019. In the first quarter of 2019, GDP growth in Estonia accelerated to 4.5% yoy in real terms and to 8.5% yoy in nominal terms. Strong first quarter growth exceeded our expectations. Seasonally and working day adjusted GDP grew by 0.5% compared to the previous quarter. In addition, the fourth quarter GDP growth was revised up by 0.1 pp to 4.3%. However, these are preliminary numbers, which will be revised several times.

Construction sector growth running out of momentum

Economic growth in the first quarter was broad-based. After a moderate growth of the last three years, manufacturing shot up again by 11%. Manufacturing was the main contributor to GDP growth in the first quarter and accounted for roughly one third. Previously, the main driver of economic growth had been construction sector, which did not contribute to economic growth in the first quarter. However, the slowdown of construction sector growth was expected. Strong contribution to GDP growth came also from agriculture; professional and technical activities; wholesale and retail trade; transportation and ICT sectors. Negative impact to the growth came mainly from energy sector.

Foreign demand still supporting Estonian economy

The growth of foreign demand has slid from the peak, but still offered good export opportunities. In the first quarter, export of goods has accelerated to 7%, while export of services has decelerated for the first time in three years. Total export increased by 5% and exceeded total import growth.

The growth of domestic demand decelerated to 4% in the first quarter. The growth of private consumption slid from the last year’s strong growth and decelerated to 2.8%. This was surprisingly weak growth considering that in the first quarter retail sales were strong, rapid wage growth continued and refunds of the excess income tax amounts were made. Investments showed strong growth for the second quarter in a row, increasing by 17% in the first quarter of 2019. The main contribution was the growth of investments of non-financial corporations due to base effect.

Economic growth in Estonia is expected to slow this year

According to our latest Swedbank Economic Outlook published in April, economic growth in Estonia is expected to decelerate to 3% this year. The main reason of the slowdown is expected weakening of the foreign demand. Economic growth has been above its long-term potential for already three years in a row and slower growth should be more sustainable for the economy. Although, due to the rapid growth of the beginning of the year we should revise up our April forecast, the next large revision this year by the Statistical Office will probably change the GDP time series.

For more information please contact Ms. Marianna Rõbinskaja, +372 888 7925,

This email is sent through the web-based distribution system of Swedbank Macro Research. As a subscriber you can change your settings regarding what publications you will receive by clicking “Change your settings”. You can also unsubscribe from this particular newsletter by clicking "Unsubscribe". Information on the Swedbank Principles of processing personal data can be found here.

Subscribe »
This letter is distributed by Swedbank in cooperation with Brightly. The letter is personal.