Uusküla: The economy is on the rise

TALLINN – A look at the economic growth indicators by sector shows that the economy is on an upward trend, according to Luminor's chief economist Lenno Uusküla.

The majority of economic activities, 12 out of 19 sectors, are growing. This economic growth was driven by traditional areas such as manufacturing, agriculture, and construction. On the other hand, real estate activities, as well as information and communication, made a negative contribution, Uusküla pointed out. 

The manufacturing industry made the largest contribution to economic growth. It accounted for nearly half of the 1.8 percent growth, contributing 0.7 percentage points. "On the positive side were also agriculture with 0.5 percent and construction with 0.4 percent. While manufacturing volumes have not grown significantly, the added value has come from a structural change. Construction has been through very difficult times with a prolonged low base level, so the progress is clearly welcome," said Uusküla.

"Conversely, negative contributions came from sectors previously considered key engines for the new economy. We've seen declines in real estate activities, wholesale and retail trade, arts, entertainment and recreation, and professional, scientific, and technical activities. The information and communication sector also had a negative impact, albeit a very small one. It is difficult to maintain the previously high level, and employment in the sector has also been declining for some time," Uusküla continued. 

According to him, the Estonian economy has been supported by domestic demand. "It has grown by 2.1 percent over the year. The increase in demand is primarily due to a growth in inventories, as other main components contributed less. Private consumption growth was 1.6 percent and government sector growth was 0.5 percent. Investments, however, fell by 6.1 percent. The contribution of foreign trade was negative, as the growth of goods imports outpaced export growth. The import of goods and services grew by 4.3 percent, while exports increased by 2.7 percent," Uusküla explained. 

He stated that Estonia's economic growth outlook for this and the next year remains positive. "However, the long-term growth potential is weak because investment levels remain low. There is a lack of investments that would increase productivity in Estonia; these are the key to long-term economic growth. Foreign demand also continues to be a negative factor, even though our current and potential trading partners are not doing poorly," Uusküla added.