Estonian economy pushes to growth of 1.6% in 2016

Estonian economy pushes to growth of 1.6% in 2016
By bne IntelliNews February 28, 2017

Estonian GDP expanded 1.6% in 2016, Statistics Estonia announced on February 28. The economy added 0.5pp to the growth it recorded in 2015, with further expansion on the cards for this year and the next.
The reading defies predictions that economic expansion would be limited to just 1.1% in 2016, thanks to ta pick up in the fourth quarter. GDP growth increased an unadjusted 2.7% y/y in the final three months of the year, the fastest growth in two years. 

As elsewhere in the Baltic region, household consumption was in the driving seat in 2016, while investment continued to drag. The latter dynamic is expected to change in 2017, eventually, as Tallinn accelerates absorption of EU funds under Brussels 2014-20 budgetary window.

Exports grew 3.6% in 2016, and although the net contribution to growth was negative there are signs that overseas sales will gain in strength in the quarters to come, Swedbank suggests.

In terms of sectoral contribution to 2016 GDP growth, information and communication, wholesale and retail trade, as well as transportation and storage were top sectors. Real estate, as well as agriculture, forestry and fishing in particular, contributed negatively.

In seasonally and working-day adjusted terms in the fourth quarter, GDP expanded 2.8% y/y and 1.9% q/q. GDP equalled €20.9bn in 2016 in current prices and €5.6bn in the fourth quarter.

Estonia's GDP is predicted to expand 2.2% in 2017, according to the European Commission. Swedbank offers the same forecast, but is more optimistic than Brussels about growth in 2018, which it sees at 2.8%, 0.1pp above the estimate of the EU executive.

“In 2017 we expect smaller contribution to growth from private consumption and larger contribution from investments and government expenditure. Contribution of private consumption to growth will somewhat increase in 2018 when the non-taxable income threshold is raised,” Swedbank analysts note.