Estonian GDP growth surges to 5.7% y/y in Q2

Estonian GDP growth surges to 5.7% y/y in Q2
The 2Q figure is a six-year high.
By bne IntelliNews August 31, 2017

Estonian GDP expanded 5.7% y/y in the second quarter, which is a six-year high, Statistics Estonia announced on August 31. 

The gain is 1.3pp quicker than the growth recorded in the first quarter, further strengthening the outlook for this year after a mediocre 2016. The growth came on the back of booming investment, which was a drag on the economy last year.

In the second quarter, investment growth surged to 16.5% on the year. The expansion came on the back of investments in transportation equipment, buildings, and infrastructure by non-financial enterprises and the government sector, Statistics Estonia said. That suggests the acceleration of absorption of EU funds is underway. 

Meanwhile, growth in household consumption, which was in the driving seat in 2016, showed a mediocre expansion of 2% y/y in April-June. 

Real exports of goods and services increased for the sixth quarter in a row, although the growth tempo was slow at just 1.3% y/y. Exports were driven by sales of machinery and equipment, as well as wood and products of wood. Imports also grew in the second quarter. Overall, the contribution of net exports was positive in April-June, although coming in at just €200mn, or 3.4% of GDP. "This indicates that external balance has not changed very much, and economic growth is still largely being financed by domestic sources," Eesti Pank noted.

In terms of sectoral contribution, construction proved the top sector. Professional, scientific and technical activities, transportation and storage, information and communication, energy, as well as wholesale and retail trade, also contributed to growth. Agriculture, forestry and fishing contributed negatively.

In seasonally and working day adjusted terms in the first quarter, GDP expanded 5.2% y/y and 1.3% q/q. GDP equalled €5.8bn in April-June.

Estonia's GDP is predicted to expand 2.3% in 2017 and 2.8% in 2018, according to the European Commission. That is likely a too conservative outlook, according to Swedbank, which – given the strong growth in the first half of the year – is currently mulling an upwards revision of its GDP forecast for 2017 beyond 3.5%.

Data

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