In Q2 2024, Estonian GDP dropped 1% y/y in real terms (seasonally non-adjusted) and it remained at the same level compared to the previous quarter (seasonally and working day adjusted – swda), according to the updated estimate of Statistics Estonia. In nominal terms, GDP growth picked up to 2.8% y/y in Q2.
Economic recession in Estonia, that lasted eight quarters in a row, has ended. The economy contracted 1.6% y/y in the first half of the year, but we expect it will improve gradually in the second half of the year. Economic recovery is mainly supported by external factors – improving foreign demand and falling interest rates, while weak confidence and planned fiscal consolidation will slow the growth, especially next year.
We expect that the Estonian economy will decline 0.6% in real terms, this year. The proposed taxes together with the government spending cuts are expected to reduce GDP growth by more than a percentage point in 2025. We forecast 1.5% GDP growth next year. The recovery of the Estonian economy requires, among other things, a significant improvement in confidence.
