In the fourth quarter of 2025, Estonia’s real GDP increased by 0.7% y/y, but declined by 0.1% over the previous quarter (seasonally and working day adjusted – swda), according to Statistics Estonia. Overall, GDP grew by 0.6% in 2025, indicating a modest recovery in line with our expectations.
In 2025, GDP growth was driven mainly by government consumption and investment. In the final quarter, household investment accelerated, and non-financial corporations’ investment turned positive; however, non-financial corporations’ investment was still negative in 2025 as a whole.
Private consumption remained weak, declining at the end of the year. Consumer confidence, a key prerequisite for consumption, improved in the second half of 2025, supported by expectations of lower inflation and taxes, but stalled at the start of 2026. Strong growth in real net wages is expected to support confidence, private consumption, and housing market activity.
In 2025 as a whole, both exports and imports grew by 5%. In Q4, export growth outpaced imports, with both goods and services exports rising strongly.
We expect Estonia’s economic growth to pick up pace in 2026, supported by increased government investment and stronger private consumption. We forecast the economy to expand by 2.3% this year and by 2.6% next year. However, uncertainty in the external environment has intensified, with the global economic outlook clouded by geopolitical tensions and trade fragmentation. As a small, highly open economy, Estonia is particularly exposed to shifts in external demand, supply chain disruptions, and changes in the global economy.
