Estonia’s economy shrinks by 0.7% 

Teksti Ingel Kink

Estonia’s economy contracted by 0.7 per cent in the third quarter of 2024 compared to the same period last year, according to data published by Statistics Estonia. The Gross Domestic Product (GDP) at current prices amounted to 10 billion euros, marking the tenth consecutive quarter of economic decline. Despite the overall downturn, some sectors showed improvement, offering a nuanced picture of the country’s current economic situation.

Robert Müürsepp, team lead of national accounts at Statistics Estonia said: “Among the activities, construction had a strong negative impact on the economy, as did manufacturing. The biggest positive contributor after two years was again information and communication, where value added grew by 7.3 per cent,” Positive contributions also came from real estate activities, agriculture, forestry, and fishing, with nearly half of all sectors adding value, including transportation, storage, and trade.

Value added, which measures output after accounting for production inputs, fell by 1.7 per cent, driven largely by a 2.5 per cent decline in the performance of non-financial corporations. In contrast, the value added by the general government grew by 2 per cent. Private consumption dropped by 2.1 per cent, the steepest decline in five quarters, with significant reductions in spending on alcohol, tobacco, recreation, clothing, and food. Growth in financial and insurance services, as well as spending on accommodation and food services, provided rare bright spots.

Investment activity declined sharply by 15.2 per cent, influenced by a 30.1 per cent drop in non-financial corporations’ investments in buildings and structures, along with a 21.7 per cent reduction by the government sector. Household investments in dwellings decreased by 16.7 per cent, while enterprises cut spending on machinery and equipment by 11.5 per cent. Müürsepp noted that the significant decline in investments reflects the unusually high levels recorded in the same period last year rather than a worsening economic outlook.

Foreign trade showed modest improvement, with exports remaining stable compared to the third quarter of 2023, while imports fell by 1.3 per cent. This resulted in positive net exports for the fourth consecutive quarter. Service exports grew by 1.8 per cent, maintaining the pace of the previous quarter, while imports of services declined by 7.6 per cent.

The seasonally and working-day adjusted GDP remained unchanged compared to the second quarter of 2024, while showing a 0.6 per cent decline from the third quarter of 2023.

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