Estonian GDP expanded 4.2% y/y in the third quarter, accelerating 0.6pp from the annual expansion recorded in April-June, unadjusted data from Statistics Estonia showed on November 29. 

The pick-up in economic expansion in the third quarter arrived on the back of investment growing 8.1% y/y. That said, investment growth slowed down as many as 16.3pp compared to the annual gain in the previous three months. 

“In the context of the deteriorating external environment and sharply worsened economic sentiment in Estonia, the strong result of economic growth is surprising in a good way,” Swedbank said.

“However, we expect that the weakened foreign demand will limit export possibilities with a longer time lag. Industrial enterprises’ expectations have worsened and foreign demand is expected to weaken further in the short term – therefore we expect that export growth will slow,” Swedbank added.  

Overall, Estonia’s domestic demand growth came in at 3.9% y/y in the third quarter, impeded to an extent by a slowdown in household consumption, which expanded just 1.2%. The corresponding figures were 5.7% y/y and 1.1% y/y, respectively, in the second quarter.

Exports expanded 7% y/y overall, including a gain of 8.6% y/y in export of goods and a growth of 4.2% y/y in export of services.

The European Commission currently forecasts the Estonian economy to grow 3.2% this year. That is an upward revision of 0.4pp versus the previous outlook. Swedbank also hints at revising its autumn forecast for Estonia again, from the current outlook of 3.2%. SEB forecasts growth of 3%, up from 2.8% expected earlier this year.

Seasonally and working-day adjusted, GDP expanded 4.1% y/y in the third quarter while adding 1% q/q. In nominal terms, GDP equalled €7bn in April-June in current prices.

In terms of sectoral contribution, information and communication proved the top segment. Professional, scientific, and technical activities, agriculture, forestry, and fishing, wholesale and retail trade, and manufacturing also contributed positively, on top of five other segments.

Electricity, gas, steam and air conditioning supply impeded the third quarter’s growth the most, data showed. Construction and mining and quarrying also dragged down on the economy.