- GDP growth in Estonia reached 8.4% year-over-year and 1.7% quarter-over-quarter in the second quarter driven by strong exports and investments, particularly in the manufacturing sector. - Exports grew 32% year-over-year while investments increased 15% due to companies raising production capacities and improving efficiency. Imports also increased 32% to support export growth. - While household consumption grew 4%, savings rates may be weakening and unofficial incomes or consumption habits may be changing as durable goods consumption increased 34%. - Additional key growth sectors included transport, construction, and tourism-related services, while real estate and financial activities declined. - Second half growth is expected to be

1. Flash comment: Estonia
Economic commentary by Economic Research Department Sep 8, 2011
GDP growth driven by exports and investments
GDP annual growth rate by the old and According to detailed GDP data released by Statistics Estonia,
new methodology economic growth reached 8.4% yoy and 1.7% qoq (s.a.) in 2Q. In
15% addition, data for previous periods starting from 2002 was revised
because of changes in methodology. As a result, the GDP growth
10% for 1Q was raised from previously known 8.5% to a whopping
9.5%. Also, growth for 2010 was cut (from 3.1% to 2.3%) and
5% contraction for 2009 increased (from -13.9% to -14.3%).
0% Strong growth in 2Q was continuously driven by exports and
investments, up by 32% and 15% yoy respectively. In both
2003
2004
2005
2006
2007
2008
2009
2010
2011
-5% categories, manufacturing sector was the leading force.
Investments, however, are becoming more widespread as
-10% companies are raising production capacities and improving the
effectiveness of production processes. As a lot of input for exports
-15%
is imported, imports reported 32% yoy growth.
new old
-20% Despite fast price growth and falling real incomes, household
consumption was up by 4%. This can point to either weakening
GDP by expenditure approach, annual savings rate (from the very high levels seen during recession
growth years) or an increase in unofficial incomes or even a possible
40%
change in consumption habits. For example, consumption of non-
GDP durable goods grew by just 1% (continuously declined for food),
Import
30% Export while that of durables was up by 34%.
Domestic demand
20% Looking at value added by sectors, in addition to manufacturing
(+33% yoy), the main contributors to growth were transport and
10%
storage (+20%), construction (+4%) and tourism-related services
0% (+21%). On the other hand, real estate and financial activities
2006 2007 2008 2009 2010 2011 reported the largest declines, by 9% and 5% respectively.
-10%
Despite solid 1H results, worsening external developments and
-20%
falling confidence are suggesting the 2H outcome will be less
-30% vigorous. Nevertheless, due to data revisions it looks like our
current forecast for this year (based on the old methodology) is too
-40% conservative and thus will be updated accordingly.
Madis Aben
Senior Economist
+ 372 6 139 035
madis.aben@swedbank.ee
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