According to Statistics Estonia’s flash estimate, Estonia’s real GDP increased by 1.3% y/y and by 0.6% q/q (seasonally and working day adjusted – swda) in Q1 2026, in line with our expectations.
In 2025, GDP recovered modestly, and this recovery continued into the beginning of this year. However, the situation varies across sectors.
The personal income tax reform is boosting households’ purchasing power and supports consumption. Swedbank card payment data indicate that consumer spending picked up at the start of the year.
Although, the war in the Middle East has pushed up fuel prices and will result in higher inflation than previously projected, household purchasing power will still increase this year. In the first quarter, the average net wage of Swedbank’s private clients increased by nearly 10% compared with a year earlier.
Exports of goods of Estonian origin declined in the first two months of the year. Although, export opportunities for Estonian companies should improve this year, the outlook has become weaker than before. In addition, higher fuel prices will increase costs for many businesses, with transport and agriculture being particularly affected.
The war in the Middle East has deteriorated economic sentiment and weakened the economic growth outlook. However, we still expect moderate growth this year, supported by increased government investment and stronger private consumption.
