GDP growth has been faster than what was reported before

GDP data magic

• GDP growth has been faster than what was reported before
• But growth is still unbalanced …
• … and downside risks prevail

GDP growth has been faster than what was reported before
Economic growth in Estonia looks much stronger in the first half of this year after the substantial data revisions by the Statistical Office this September. There was no decline in economic activity in the first quarter as was reported earlier. According to the revised data, GDP growth accelerated from 0.3% in the first quarter to 2.4% in the second quarter. Higher GDP growth is more in line with other economic indicators, i.e., the fast growth in wages, retail sales, and real estate prices.

But growth is still unbalanced and therefore unsustainable …
In the second quarter of this year, economic growth was still too dependent on private consumption. Investments grew modestly. The growth of exports remained small, affected by weak external demand and increased geopolitical tensions. In a tiny, open economy like Estonia, consumption-based growth cannot continue for long, if exports and investments do not pick up.

… and downside risks prevail
As the economic growth rate of Estonia for the first half of the year was lifted considerably, analysts might consider revising their forecasts upwards later this year. At the same time, negative external risks have clearly grown. The Russia-Ukraine conflict and new round(s) of sanctions from both sides have increased the instability in the region and will dampen trade and investment flows.

Source: Swedbank

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