Swedbank: Estonia: recession deepened towards the end of 2022

  • SwedbankIn Q4 2022, GDP contracted 4.1% y/y (non-adjusted) and 1.6% q/q (swda) in real terms.
    Quarter-on-quarter GDP fell throughout 2022.
  • In 2022, GDP fell 1.3% in real terms, but expanded 15.1% in nominal terms – the fastest result of the last 14 years.
  • According to the preliminary data, Estonian economy was the only one in the EU, where annual GDP contracted in real terms in 2022.
    GDP contraction in Q4 met our expectations. However, the full year of 2022 remained below it as Statistics Estonia revised down previous quarters of the year by 0.9 percentage points, on average.
  • Recession became more broad-based in Q4, ie. value added of 13 economic activities out of 20 dropped. The largest negative contribution came from ICT sector, whereas agriculture gave the largest positive contribution.
  • Contraction of private consumption deepened as purchasing power deteriorated. Q4 hid some unexpected results (fast increase in households’ housing investments despite sharp drop of transactions), one-off transactions (corporations’ investments in transport equipment) and base effects (the decline in export of services due to the export of VW software licenses in Q4 2021).
  • In 2022, inventories’ contribution to the GDP change was the strongest of the last seven years.
    We expect that year-on-year economic recession in Estonia will continue at least in H1 this year.

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