Broad-based growth pushes Estonia’s GDP

TALLINN - GDP growth for Estonia increased by 7.9 percent in the 3rd quarter of 2011 compared to the same quarter the previous year, shows the flash estimate from the statistics office, reports news2biz. While the pace of growth has somewhat slowed since the beginning of the year - the economy grew by 8.5 percent and 8.4 percent in Q1 and Q2, in annual comparison, respectively - it has still managed to beat forecasts.

According to Eesti Statistika, the manufacturing sector contributed the most to the annual GDP growth, similar to previous quarters. However, the impact of manufacturing has decreased with its output growth slowing in August and September.
The statistics office notes that the GDP growth has become more broad-based due to the increase of the contribution of other economic activities besides manufacturing. According to the preliminary data, the construction sector as well as ICT had a considerable contribution to the GDP growth. At the same time, the increase in the collection of VAT and excise taxes have also had a considerable influence on the GDP growth. In quarterly comparisons, Estonia’s GDP moved up 0.8 percent in the 3rd quarter, seasonally and workday adjusted, following the second quarter’s q-o-q growth of 1.7 percent.

Nonetheless, Heido Vitsur from the Estonian Development Fund believes that despite the 7.9 percent annual growth in the third quarter, the Estonian economy will continue slowing down because the European economic recession “is going to catch up with Estonian exporters.”
“Although the third-quarter figure was nice, the fourth quarter is likely to be quite different. The reason is the slowdown in industrial output and exports. Things are not going well in Europe and globally as they were half a year ago,” Vitsur said, reports Aripaev.

Speaking of unemployment, Vitsur said that there is no bubble in the Estonian economy, which means that a new crisis would not create a major unemployment wave.
Estonian fourth-quarter inflation is likely to remain a few percentage points higher than in Europe.
On Nov. 10, the European Commission warned that changes in foreign trade, triggered by the eurozone debt crisis, could significantly impact Estonia’s economic growth, which has been to a large extent fueled by manufacturing exports. The commission’s estimate put the country’s 2012 GDP growth at 3.2 percent.

Analysts at the Bank of Estonia, Finance Ministry and commercial bank analysts have universally predicted that growth would slow significantly next year.