In Q2 2023, GDP dropped 3% y/y and 0.3% q/q (both swda) in real terms, according to the flash estimate of Statistics Estonia. GDP contraction in Q2 was below our expectations.- However, the economic contraction is receding gradually.
- Estonian economy has fallen six quarters in a row in quarter-on-quarter and five quarters in year-on year comparison. At the same time, labour market is strong and wage growth is robust.
- The fall of manufacturing output and retail trade volumes have intensified. Deflated export of goods is still far below the level we saw in the same period in 2022. The growth of the number of accommodated tourists slowed in the first two months of Q2 compared to what we saw in Q1.
- Economic sentiment continued to deteriorate in Q2.
- Real wages are rising again, and we expect that households will start to increase their consumption volumes with a certain time lag. The receding contraction of VAT and excise tax receipts refers to the gradual improvement of economic activity.
