- According to revised data, Estonia's economic growth slowed to 2.2% in the second quarter from 3.4% in the first, though seasonally adjusted quarterly growth accelerated. - Domestic demand (6.1% growth) rather than exports drove growth, with high investment (25.8%) but surprisingly weak private consumption (1.9%). - Construction, retail, and ICT saw the highest sectoral contributions while manufacturing's contribution was negative for the second quarter in a row. - Revised GDP figures showed a deeper economic crisis and steeper recovery than previously estimated, though first half 2012 growth remained largely the same.

1. Flash comment: Estonia
Economic commentary by Economic Research Department September 7, 2012
Economic growth in 2Q founded on domestic demand
Economic growth According to the revised data published by Statistics Estonia, the
12% 6% economic growth slowed from 3.4% in the first quarter to 2.2% in
the second quarter. However, the seasonally adjusted quarterly
8% 4%
growth accelerated from 0.2% to 0.5%.
4% 2%
The structure of the economic growth continued to shift from
0% 0%
exports towards domestic demand, and the contribution from net
2007 2008 2009 2010 2011 2012
-4% -2% exports has turned negative. Domestic demand growth (6.1%) was
-8% -4% supported by high investment activity (25.8%), whereas private
consumption was surprisingly weak (1.9%). Strong growth in
-12% -6%
investments was founded on pickup in the construction activity
-16% -8% (impacted by public sector projects) and private sectors’
-20% -10% investments to machinery and equipment. Despite good retail sales
quarterly grow th, s.a. (rs) annual grow th and tax collections, private consumption growth was, however,
Economic growth according to the old
clearly below expectations; this can be explained by a risen share
and the revised new time series of non-residents’ purchases in retail sales.
10% On the sector level highest contribution came from construction,
retail trade and ICT. The contribution from export-dependent
5% manufacturing was negative for the second quarter in a row; this is
mainly connected to the falling production in the electronics sector.
0%
Statistics Estonia also published today revised time series since
08(I) 09(I) 10(I) 11(I) 12(I)
2008 which made the bottom of the crisis deeper and in turn the
-5%
following recovery steeper than previously thought. The growth in
the first half of this year remained by and large the same – first
-10%
quarter growth was revised somewhat downwards and the second
quarter growth upwards as compared to the flash estimate.
-15%
new old
-20%
Outlook
Confidence indicators
Global business cycle outlook continues to be uncertain and the
40
downside risks have reached more clearly the international trade
cycle. With downside risks prevailing also at our main export
20
partners’ economies, we expect the economic growth to continue to
be founded on domestic demand also in the second half of this
0
year. In our latest forecast we expected the average growth to
2009 2010 2011 2012
reach 3% this year, but negative risks are becoming more visible
-20
now. We will publish our revised economic growth expectations in
the beginning of October.
-40
consumer
industry
-60 retail
construction
services
-80 Kristjan Tamla
+372 888 7952
kristjan.tamla@swedbank.ee
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reliable sources and methods in the preparation of the analyses reported in this publication.
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