Estonia is one of the fastest growing economies in the world
Estonia’s third quarter GDP growth of 8.6% year on year surpassed both, Europe’s and the world’s average GDP growth (3.9% and 4.5%, respectively).
According to the OECD, in the third quarter of 2021, GDP of the OECD area rose above its pre-pandemic level for the first time, despite slower growth compared to the second quarter.
“Like elsewhere, growth in Estonia is driven by demand, which is reflected in the rapid growth in private consumption,” explains Kaspar Oja, economist at the central bank of Estonia, Eesti Pank. According to Oja, there are two factors behind this in a large part of the world. Firstly, easing of the pandemic situation has expanded opportunities for consumption, by making travel easier, for example. Secondly, people built up savings during the lockdowns that they can now direct into consumption. Those factors have been enhanced further in Estonia by early one-time withdrawals from the second pension pillar.
IT, construction, real estate and logistics are growing rapidly
Compared to the pre-pandemic times, Estonia’s economic growth has been stable, states Statistics Estonia. The growth continues to be broad-based, and several economic activities have shown very strong results.
“The economic growth was driven by construction, information and communication, real estate, transportation and storage activities,” notes Robert Müürsepp, leading analyst at Statistics Estonia. According to business daily Äripäev, IT, construction, real estate and logistics accounted for more than half of economic growth. In addition, manufacturing and professional, scientific and technical activities recorded positive results as well, says Müürsepp.
Foreign trade continued rapid growth: export and import grew equally by 17.5%. Export of services grew the fastest, by 38.9%, driven by computer services and other technical and business services. The biggest contributors to trade were wood and products of wood, computers and electronic equipment, metal products and electricity.
Eager to achieve more
Although the economic results were excellent, Estonians accustomed to business success are still a little disappointed, as double-digit economic growth was expected, writes Äripäev. As a reason for the lower-than-expected GDP growth the bank analysts see the impact of inflation on real growth that was slightly larger than expected. Kaspar Oja from Eesti Pank notes that inflation is currently high largely because of higher energy prices that are slowing the increase in consumption as inflation reduces the growth in real incomes. However, this is essentially a temporary factor, believes Oja.
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