Swedbank: Estonia: robust demand contributes to the economic growth

  • SwedbankGDP expanded 8.6% y/y and 0.7% q/q (swda) in 3Q – the growth met our expectations.
  • GDP has increased 8.5% y/y in the first three quarters of 2021.

In 3Q, more than half of the GDP growth came from four economic activities: construction, ICT, real estate activities and transportation. Private consumption increased 8.7% largely with the support of money withdrawn from the mandatory funded pension scheme. Investments contracted by 8.8%, as large software investments made by Volkswagen Group in its Estonian subsidiary receded. Inventories contributed more to the GDP growth than did private consumption and export of goods. Government restrictions for limiting the spread of the virus had minor impact on total economy.

Economic output has exceeded pre-pandemic peak by 5.1%, in real terms. Supply bottlenecks, labour shortage and increased commodity and energy prices are increasingly limiting economic growth. Additional risks may come from the spread of the Omicron variant of the virus. Despite 3Q GDP growth met our expectations, we will probably revise 2021 GDP growth forecast (9%) slightly down.

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