Flash comment: Estonia - May 11, 2012: Economic growth in 1Q supported by recovering domestic demand

1. Flash comment: Estonia
Economic commentary by Economic Research Department May 11, 2011
Economic growth in 1Q supported by recovering domestic demand
Economic growth and confidence According to preliminary data released by Statistics Estonia, the
15% economic growth slowed from 4.5% in the last quarter of last year
115 to 3.9% in the first quarter of this year. Seasonally adjusted
10%
quarterly growth was measured at 0.5%.
5% 105
The main contributor to growth was the construction sector,
0% 95
where growth is continuously supported by (re)construction works
2007 2008 2009 2010 2011 2012 of buildings, mostly funded by the public sector. As expected,
-5%
85 growth in the retail sector was strong as well.
-10%
Manufacturing sector, however, which was the main driver of
75
-15% growth at the beginning of last year, contributed negatively to the
-20% 65
growth in the first quarter of this year. This was caused mainly by
GDP annual grow th (ls)
falling output in the manufacturing of electronic and metal products
Economic Sentiment Indicator, pts (rs) (due to weaker external demand) and electricity supply (due to
increase in imported cheaper electricity).
Manufacturing output and retail sales, Although no details were given yet, it can be assumed that the
annual growth contribution of net export was negative – exports growth slowed
40% faster compared to imports, as the latter was supported by
30% recovering domestic demand.
20% Outlook
10%
Economic growth in 2012 will be founded on strengthening
0% domestic demand and stabilising developments in the competitive
-10%
2008 2009 2010 2011 2012 market. Although export growth will remain modest, contribution of
smaller manufacturing sectors will increase; nevertheless, the
-20%
electronics sector will continue to have a high share in total
-30% exports. In addition to public sector investments, domestic demand
-40% will be supported by growing confidence of households as labour
retail manufacturing market situation improves and inflation slows.
Although the first quarter preliminary economic growth was
somewhat higher than expected, we retain our current forecast of
2.7% growth on average this year.
The detailed GDP growth with more detailed data will be published
on 8 June.
Annika Paabut
Chief Economist
+ 372 6 135 440
annika.paabut@swedbank.ee
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