TALLINN - Estonia’s central bank, Eesti Pank, said on Feb. 1 when commenting upon the fresh economic growth data, that domestic demand alone will not be sufficient to drive economic growth further, reports LETA.
The preliminary estimate by Statistics Estonia shows that the Estonian economy grew by 3.7 percent year-on-year in the fourth quarter of 2012, and 0.9 percent quarter-on-quarter. In 2012 as a whole, the economy grew by 3.2 percent, which is faster than Eesti Pank had forecast. Growth in the next quarters will depend on how the economies of the euro area and the Nordic countries recover from their current lows.
Domestic demand offset the weakening in exports in 2012, but balanced economic growth needs strong exports because the ability of households to keep increasing their consumption is limited. In the third quarter of 2012, household consumption increased notably faster than incomes, and savings fell to a low level. Data for the fourth quarter suggest that the rise in domestic demand indicators like retail sales has slowed, and the annual growth in indicators relating to exports, like industrial production, has accelerated.
Industrial production fluctuated a lot from month to month in the fourth quarter and saw sharp rises and falls, suggesting that the recovery in external demand is still fragile. The industrial production and exports of Estonia’s main trading partners do not indicate that the situation will improve rapidly, though the economic confidence indexes and output expectations of the manufacturing sector have picked up in recent months in the Nordic countries, which indicates that pessimism has fallen among businesses in that region.
Eesti Pank’s forecast in December predicted that the economy will grow by 3 percent in 2013.
In the 4th quarter, the biggest contributor to economic growth was the increase in value added in information and communication, trade and transport. The increase in the value added of trade was supported by the stable growth of retail sales.
In addition to the above-mentioned economic activities, GDP growth was also significantly influenced by increased receipt of excise taxes, which are part of net taxes on products.
The industrial sector’s contribution to GDP growth was minimal (0.1 percentage points). The biggest driver of economic growth in Estonia is manufacturing. The value added of manufacturing depends substantially on the export of the production. According to preliminary calculations, the real growth of export of goods of the total economy accelerated to 10 percent, mainly due to the increased exports of computers, electronic and optical products, beverages, and products of agriculture, forestry and fishing.
Economic growth was slowed by the decrease in value added in agriculture, forestry and fishing and in real estate activities.
The industrial sector includes the following economic activities: mining and quarrying; manufacturing; electricity, gas and water supply; and construction.
The revised GDP estimates for 2012 and the 4th quarter will be published by Statistics Estonia on March 11.