In a flash economic commentary for Estonia, it was noted that GDP growth slowed to 7.9% year-on-year in Q3 2011, primarily due to reduced manufacturing output and slowing export sales. The broader economic growth is becoming more diverse with contributions from the ICT and construction sectors. The outlook for Q4 suggests continued slowdown influenced by high comparison bases and global economic conditions affecting export-dependent sectors.

1. Flash comment: Estonia
Economic commentary by Economic Research Department Nov. 11, 2011
Economic growth slowed in 3Q, in line with our expectations
Economic growth According to Statistics Estonia, GDP grew by 7.9% yoy and
12% 0.8% qoq (s.a.) in 3Q 2011. This is a flash estimate, thus no further
details were given – specified GDP data with all its components will
8%
be published on 9 December.
4%
0% Decelerating growth rates are mostly founded on slower
2006 2007 2008 2009 2010 2011 manufacturing output growth (from 36% on average in 1H to 21%
-4%
in 3Q) and thus its smaller contribution to the overall economic
-8% growth. This in turn is affected by slowing export sales growth,
-12% namely from 63% in 1H to 36% in 3Q. The main sector behind this
-16%
slowdown is manufacture of computers, electronic and optical
qoq, s.a. yoy products. Nevertheless, due to smaller contribution from the
-20% manufacturing sector, the overall GDP growth has become more
broad-based with ICT and construction sectors contributing
increasingly more. The latter is connected with growing
Manufacturing, annual growth investments both in private as well as public sectors.
80%
We expect economic growth to slow further in 4Q, on one hand
60% being affected by high comparison base (GDP growth in 4Q 2010
reached 6% yoy) but on the other hand by global developments
40% since the economic recovery thus far has been strongly export-led.
Slowing economic activity in the core-Europe (Germany, France)
20% will impact export-dependent Nordic countries and thus have an
affect on the Estonian export sector as well. Confidence figures are
0% already indicating to slowing growth. However, the improved
2006 2007 2008 2009 2010 2011 competitiveness of Estonian products and services which has
-20% helped to increase their market shares, can be considered as a
Production positive risk in this global environment – if the economic agents in
Export sales
-40% the partner countries should become more price-sensitive, the
export of Estonian goods-services might not decline with the same
pace as the economic activity in these exports markets.
Annika Paabut
Chief Economist
+ 372 6 135 440
annika.paabut@swedbank.ee
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