Ministry: Estonian economic growth remained moderate last year

TALLINN - The Estonian economy grew gradually over the last year, with its volume in the fourth quarter being 0.7 percent larger than a year ago. Private sector employment decreased, but wage growth remained faster than in the public sector, commented Madis Aben, an analyst at the Ministry of Finance's fiscal policy department.

Economic and consumer confidence has improved significantly since the summer, but consumer activity remained modest even at the end of the year. Nevertheless, spending related to leisure activities increased.

Estonia's economic growth at the end of 2025 was slightly below forecasts. General economic confidence, which began to improve steadily in early 2024, has been fueling hopes for faster growth for a couple of years. While Sweden, Latvia, and Lithuania are experiencing strong economic growth, Finland is still not supporting Estonia's economic recovery, Aben noted.

In terms of economic structure, the multi-year decline in the number of employees in the manufacturing industry continued last year. Employment in the trade sector also decreased, largely due to a sharp slowdown in car sales. Despite this, wage income and profits grew in the manufacturing industry, as well as in professional and scientific activities and the IT sector. Leisure-related businesses have also performed well.

Last year, average wage growth in the private sector surpassed that of the public sector, reversing the trend of the previous two years. The private sector managed to maintain rapid wage growth during these challenging times, but in several areas, this came at the expense of profitability and a reduction in employee numbers. In healthcare, education, and public administration-which includes internal and external security-the demand for labor has increased, but average wage growth has slowed due to the tight state budget.

"Despite the modest economic growth figures, there are indirect signs of improving public well-being. Although overall private consumption did not grow last year, the consumption of goods and services related to leisure increased significantly," Aben said.

"Although this growth may not have been evenly distributed among the population, it indicates that, for Estonia as a whole, people could afford more than just the essentials. Concurrently, spending by Estonian residents abroad also grew rapidly. This shift in the consumption structure points to an improvement in the standard of living," Aben added.