Estonian industrial production grew 2.3% in 2016, driven by expanding energy production and growth in manufacturing, data from Statistics Estonia showed on January 31. The reading marks a turnaround on the 2% contraction suffered in 2015.

The result is an encouraging sign for the Estonian economy, especially the acceleration of industrial towards the end of the year. Output in December surged by 10% y/y, adding 0.7pp to an an already strong data set from the previous month.

GDP grew just 1.1% y/y in 2015, the slowest rate in six years. The economy improved somewhat in January-March, growing 1.7% y/y, but faltered again in the second and third quarters. However, like much of CEE, there is hope that stronger activity in the fourth quarter - driven by rising export demand - will be reflected in full year results, and that early 2017 will see an extension of that push.

The European Commission forecast in November that last year's Estonian growth will be capped at the 2015 level, a downward revision from the 1.9% predicted in May. Estonia will publish GDP data for the fourth quarter on February 28.

Energy production increased 14.5% in 2016, while manufacturing grew 2.1%, the data showed, while output in the mining sector dwindled 15.6%. Within the manufacturing segment, production of electrical equipment and chemicals and chemical products drove growth as they expanded 14% and 13%, respectively.

Overall, more than two thirds of industry branches increased output in 2016. Overall, 69% of manufacturing production was sold on the external market.