In 2007 economic growth decelerated in Estonia

According to preliminary calculations of Statistics Estonia, the gross domestic product (GDP) increased by 7.1% at constant prices in 2007 compared to the previous year. In the 4th quarter of 2007, GDP grew by 4.8% compared to the same period of previous year.

GDP at current prices was 243.3 billion kroons and at constant 2000 prices it was 169.1 billion kroons. In 2007, the GDP growth decelerated gradually due to the deceleration of domestic demand and exports and imports of goods and services. The growth rate of domestic demand decelerated to 9.3% compared to 2006 (in 2006, domestic demand grew by 16.1%). A steep deceleration of household final consumption expenditure and capital investments in the second half of the year influenced the deceleration in the growth rate of domestic demand. Growth of exports and imports decelerated as well, whereas in the second half of the year both indicators even decreased. Thus, in 2007 compared to the previous year, exports increased only 1.5% and imports increased 2.8%. At the same time, deficit of net exports in GDP somewhat improved.

Deceleration in the growth of domestic demand and exports brought about deceleration in the growth of corporations’ sector to 5.8% (in 2006, the sector grew by 12.4%).

Value added growth of the majority of economic activities decelerated in 2007 compared to 2006. A more significant deceleration was in hotels and restaurants, wholesale and retail trade and real estate, renting and business activities. The annual growth of value added decelerated fast in the electricity, gas and water supply activity. However, the growth rate of this economic activity accelerated in the second half-year. Value added grew faster than in 2006 only in the fishing, mining, and public administration and defence activities.

In the 4th quarter of 2007, GDP grew by 4.8% compared to the same period of previous year. GDP at current prices was 65.7 billion kroons and at constant 2000 prices it was 43.5 billion kroons. Deceleration of the GDP growth continued in the 4th quarter being influenced by deceleration in the growth of domestic demand, by decrease in the exports and imports of goods and services and hence by a steep deceleration in the value added growth of corporations’ sector.

Domestic demand grew by 5.5% in the 4th quarter. Within the components of domestic demand, the growth rate of household final consumption expenditure decelerated to 3.3% compared to the 4th quarter of 2006 mainly due to the deceleration in the growth of expenditures on food and non-alcoholic beverages and due to the decrease in the expenditures on clothing and footwear. Capital investments grew by 5.6%. Investments by non-financial corporations supported the total investments of the economy the most, whereas the investments made by financial, general government and households’ sectors decreased.

Exports and imports of goods and services decreased at constant prices in the 4th quarter. Exports decreased by 0.2% compared to the same quarter of 2006, but imports decreased by 0.7%. Specifically, the exports and imports of goods decreased, whereas the exports and imports of services increased. Decrease in the exports of goods was mainly influenced by the decrease in the exports of mineral products and machinery and equipment. Decrease in the imports of machinery and equipment and metals and products thereof influenced the most the decrease in the imports of goods. Deficit of net exports in GDP increased to the level of 8.9%.

On the supply side of the economy, deceleration in the value added growth of manufacturing and real estate, renting and business activities to respectively 4.9% and 0.6%, in addition, decrease in the value added of wholesale and retail trade and transport, storage and communication activities, compared to the 4th quarter of 2006, influenced deceleration in the growth of GDP.

Taxes on products less subsidies grew fast in the 4th quarter, by 13.4% at constant prices compared to the same period in 2006. A large accrual of tobacco excise and fuel excise due to the purchase of tobacco products and fuel by enterprises before the increase in the excise taxes as of 1 January 2008 influenced the fast growth of taxes on products less subsidies.

In the 4th quarter of 2007, the seasonally adjusted GDP at constant prices increased by 0.8% compared to the previous quarter.

Growth in GDP, domestic demand and exports and imports of goods and services at constant 2000 prices, 1st quarter 2005 – 4th quarter 2007

On 8 September 2008, Statistics Estonia will publish in the database the revised constant price calculations since 2000 at previous year prices and chain-linked. In order to avoid publishing two revisions on different dates, the previously planned release of the regular revision of the 2004–2007 national accounts on 9 June will be postponed to 8 September 2008. Constant price calculations at previous year prices of 1995–1999 will be published in the Statistics Estonia database in December.

Source: Statistics Office