Estonia’s GDP contraction was considerably smaller than the EU average (4.8 per cent) and the eurozone average (5.1 per cent) in the fourth quarter of 2020.
In Statistics Estonia’s news release, their leading analyst Robert Müürsepp explained that, for example, the situation in the field of manufacturing improved to pre-pandemic levels in the fourth quarter. Being hit by the COVID-19 related situation in spring 2020, in the second half of the year, trade showed signs of recovery, which, according to Müürsepp, is a good indicator of how quickly the Estonian economy can adapt.
Foreign trade fared well despite the restrictions on international transport. The low level of travel services still limited the export and import of services, but trade in goods reached a historically high level. Both, the import and export of goods were boosted by trade in electronic equipment and chemical products – by 14.4% and 8.7%, respectively. The export of wood products also helped to increase exports, while imports were driven by the import of various machinery and equipment.
Kaspar Oja, economist at the Bank of Estonia told ERR that the economy’s recovery began during the third quarter of 2020 and continued in October and November. According to Oja, the economic impact of COVID-19 related restrictions is lower than their social impact as sectors with smaller added value are mostly affected.
Both, Oja and his colleague from SEB Bank, Mihkel Nestor predict GDP growth in 2021. “The economy will start growing and in the second half of the year, we can expect strong growth,” says Nestor. While a growth of 3.8 per cent is expected, he adds that Estonia’s ongoing pension reform can raise consumption at the end of 2021 and this, in turn, may further affect the GDP towards growth.
In 2020 in total, the Estonian economy shrank by 2.9%. Manufacturing, trade, and accommodation and food services were the main contributors to the economic decline.