In Q4 2023, Estonia’s GDP dropped 3.0% y/y in real terms and remained on the same level compared to the previous quarter (swda), according to the flash estimate of Statistics Estonia.- Estonian GDP contracted 3.5% y/y (swda) and 3.4% (non-adjusted) in 2023.
- GDP flash estimate was close to our expectations.
- The recent deep contraction of manufacturing output and retail volumes is slowing.
- At the same time, Estonian overall economic sentiment has continued to deteriorate.
We forecast that the Estonian economy will rebound to the year-on-year growth in the second half of this year, but it will decline 0.3% over the full year of 2024. The expected improvement of foreign demand will enable Estonian enterprises to increase their exports in the second half of the year.
Although real wages are increasing since the middle of 2023, private consumption is expected to start to increase with a delay, as households’ confidence is still very weak. The decline in interest rates will be a relief for households and nonfinancial corporations.
