Estonian GDP expanded 4.2% y/y in the third quarter, dropping from a six-year high recorded for the previous three months, unadjusted data from Statistics Estonia showed on November 30. 

The gain is 1.5pp slower than in April-June, but still clearly higher than in any quarter in 2015 and 2016. The annual growth in July-September came on the back of booming investment, which was a drag on the economy last year.

GDP fell 2.7% q/q in unadjusted terms. Seasonally and working day adjusted, GDP expanded 4.2% y/y in July-September as well, while growing 0.3% q/q. In nominal terms, GDP equalled €5.8bn in the third quarter.

Annual investment growth came in at 13.2% y/y, an impressive result even if in fact a slowdown on the expansion of more than 16% y/y seen in the previous three months. The growth came on the back of government investment in buildings and facilities, while companies invested in machinery and equipment. That suggests the acceleration of absorption of EU funds is underway. 

Growth in household consumption showed an expansion of 3.5% y/y in the third quarter, adding 1.5pp to annual expansion in Q2. 

Real exports of goods and services did not grow on annual basis in the third quarter, while imports grew 4.2% y/y, driven by import of basic metals, motor vehicles, trailers and semi-trailers, and other machinery and equipment. Overall, the contribution of net exports remained positive in July-September, coming in at just €300mn, or 5.2% of GDP.
 
In terms of sectoral contribution, construction proved the top sector for the third quarter straight. Information and communication, mining and quarrying, professional, scientific and technical activities, manufacturing, transportation and storage, and administrative and support service activities also contributed to growth. Energy, trade, and real estate contributed negatively.

Estonia's GDP is predicted to expand 4.4% in 2017 and 3.2% in 2018, according to the European Commission; the recent forecast by the OECD puts growth at 4.4% in 2017 and 3.3% in 2018.