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Exports behind GDP growth

  • 2010-12-16
  • From wire reports

TALLINN - Estonia saw its GDP increase by 5 percent in the 3rd quarter of 2010, compared to the same period of the previous year, show first estimates of Statistics Estonia, reports news agency LETA. The seasonally and working-day adjusted GDP increased by 0.7 percent in the 3rd quarter compared to the 2nd quarter. Compared to the previous quarter, the GDP increased for the fourth quarter in succession. In the 2nd quarter this year GDP increased by 1.9 percent, and in the 1st quarter 1.0 percent.

In the 3rd quarter, the GDP at current prices was 58.8 billion kroons (3.7 billion euros). The 3rd quarter GDP was influenced mostly by the growth in value added (25 percent) by manufacturing activity, due to vigorous growth of exports. The sales of manufacturing output on the domestic market increased as well. The sales of manufacturing output on the domestic market last increased in the 1st quarter of 2008.

The increase of the value added in manufacturing of electronic and optical equipment accounted for the largest share in the growth of manufacturing. The increase of the value added output in manufacturing of wood and wood products, as well as in manufacturing of basic metals and fabricated metal products also had a remarkable impact on the growth of the manufacturing sector.

The value added of the economic activities in the primary sector, industrial sector and predominantly market-based service sector increased. In the industrial sector, only the value added output in construction decreased, by 2 percent. At the same time, the decrease of the value added in construction activity decelerated steeply due to the increase in construction numbers abroad and in construction numbers in local projects. The value added of the economic activities of the predominantly non-market service sector, i.e. those activities by the general government and non-profit institutions serving the household sector, continued their decrease.

Despite the growth in domestic demand (5 percent), its share in GDP decreased, accounting for 87 percent in the 3rd quarter. Domestic demand grew primarily due to an increase in inventories. The increase of the inventories of goods and raw materials of the non-financial corporations had the biggest impact on the increase in inventories.
Household final consumption expenditures rose by 1 percent, but its effect on the growth of domestic demand was small. The growth of household final consumption expenditures was caused mainly by the increase in expenditures on durable goods, especially on vehicles and household goods and furnishings. At the same time household final consumption expenditures were inhibited by the decrease in expenditures on food, non-alcoholic and alcoholic beverages and tobacco. Household final consumption expenditures last rose in the 4th quarter 2007.

Gross fixed capital formation decreased by ten percent. By assets, investments in buildings and structures decreased the most. At the same time, investments in machinery and equipment increased to some extent. Gross fixed capital formation has decreased since the 3rd quarter of 2007. While the share of the gross fixed capital formation in the GDP was 35 percent in 2007, it has decreased to merely 18 percent by the 3rd quarter this year.
Exports of goods and services grew in real terms by 24 percent in the 3rd quarter in support of the improvement of the external demand. Exports of goods increased by 36 percent. Growth was influenced mainly by the growth of exports of radio, television and communication equipment, as well as by the increase in exports of wood and wood products, metals and machinery and equipment.

The recovering economy, with the increase in domestic demand, brought on rapid growth in imports. Imports of goods and services increased by 29 percent; imports of goods alone rose by a third. The growth of imports of goods was influenced mainly by the growth of imports of radio, television and communication equipment. Growth in imports of motor vehicles, building materials and chemical raw materials also had a big impact on the increase of imports. Exports of goods and services have exceeded imports since the 1st quarter of last year. The share of net exports in GDP was 9 percent in the 3rd quarter.

Primary income (compensation of employees and investment income) payable to the rest of the world was bigger than the primary income received from the rest of the world in the 3rd quarter. Therefore, the Gross National Income (GNI) was smaller than the GDP (56.1 billion kroons). In the 3rd quarter the gross disposable income increased faster than final consumption expenditures, so the gross saving of the total economy increased.

Gross savings accounted for 31 percent of the gross disposable income, which is the highest result since 1995. Gross savings is a substantial domestic source for financing capital investments. As the savings of the total economy exceeded gross capital formation in the 3rd quarter, Estonia was a net lender for the rest of the world. Net lending accounted for 9 percent of the gross disposable income. Estonia has been a net lender for the rest of the world since the 1st quarter of the previous year.