Due to the insane rise in prices, Estonia's gross domestic product decreased by 2.4 percent in the third quarter compared to last year. Analysts were surprised by the poor state of the economy.
According to Statistics Estonia Statistikaamet. , in addition to Estonia, the gross domestic product (GDP) in the European Union fell only in Latvia, but even there by only 0.4 percent. Even with the rate of price increase, we outperformed the rest of Europe in the third quarter, but in November we came second. According to Eurostat's quick estimate, prices increased by 21.4 percent in the last month, while in Latvia they increased by 21.7 percent.
SEB Bank's economic analyst Mihkel Nestor predicts that Estonia's economic recession will continue for another three quarters in an annual comparison, after which the economy will stabilize. In the near future, according to the analyst, the manufacturing industry is in the most difficult situation, as the demand from foreign markets is clearly suppressed and therefore unemployment is likely to increase.
Statistics Estonia Statistikaamet. 's lead analyst Robert Müürsepp noted that clearly the most negative contribution to the economy came from agriculture. "Cost growth was extremely fast, and although revenues also increased, it did not cover the price increase," he said.
Müürsepp said that in addition to agriculture, energy and real estate activities also slow down the economy. "Although in current prices the added values of almost all areas of activity increased by more than ten percent, behind this lies a rapid price increase. It ate up the real growth of almost all areas of activity and even pushed half of them into decline."
Private consumption, which increased in the first half of the year, turned to decline in the third quarter. Spending on home furnishings, which received more attention during the corona crisis, has decreased the most. The consumption of healthcare services and the purchase of clothing and footwear have also decreased.
Eesti Pank predicts a slight recession for Estonia this year. In the following quarters, the year-on-year decline may worsen, but according to the central bank, the economy could also start to recover in the second half of next year.