The fall in GDP was smaller than had been feared because of the recovery in export markets, the economic policy measures passed by the government, the generally good handling of the virus in Estonia, and the lag in the reaction of some branches of the economy to the crisis, writes the Baltic Course.
Monthly indicators show the economy probably hit its lowest point in April. Retail started to recover in May and exports did so strongly in June. Exports were revived by the rapid recovery of foreign markets, as the fall in the second quarter proved smaller than had been feared in many economies. As the Estonian economy is very open, the economic performance of other countries has a substantial impact on it.
However, the crisis is not over yet and there is much uncertainty about how the economy will perform in the months ahead. The fall in the economy has been uneven though and circumstances remain difficult in certain sectors, in particular in the accommodation and food services sectors.
Some economic indicators for the third quarter suggest that overall economic activity had already reached last year’s level in July.
Among branches of the economy that focus on the domestic market, the construction sector saw value added grow in the second quarter. Construction volumes showed a decline in value added and the number employed in the sector fell, but the growth in the construction sector may reflect economic inertia, as construction projects cannot be simply halted overnight. This means the low point of the fall may appear in the construction sector in the coming quarters after some lag. The deceleration in growth in the construction sector was also slower than that in other sectors during the crisis of 2008.