In the third quarter of 2024, Estonian GDP dropped by 0.7% y/y in real terms (seasonally non-adjusted), while remained at the same level compared to the previous quarter (seasonally and working day adjusted), according to the updated estimate of Statistics Estonia. In nominal terms, GDP growth accelerated to 3.9% y/y in the third quarter.
Despite real wages are growing and falling interest rates have brought some relief to the households with loans, private consumption still fell in the third quarter. Consumer confidence is weak. Next year’s tax increases will decrease households’ purchasing power. However, falling interest rates will continue to alleviate obligations for households with loans. Swedbank card payments suggest that private consumption fell in October. For 2025, we forecast only a modest recovery of consumption.
Large negative contribution to the GDP came from investments, as government, non-financial corporations’ and households’ investments declined in the third quarter. We expect falling interest rates and improving demand to contribute to a pick-up in housing investments by individuals and in the corporate sector investments.
The decline in exports of goods continued to slow as foreign demand is improving. Net exports contributed positively to the GDP growth in the third quarter.
We expect that the Estonian economy will decline 0.8% in real terms, this year. While government fiscal consolidation will hold back economic expansion in 2025 and 2026, growth will be supported by falling interest rates and increasing foreign demand. We forecast 1.5% GDP growth next year.
