In second quarter, Estonia’s gross domestic product put on 1.3 per cent year-on-year. As compared to previous three months, growth was but 0.1 per cent. The frankest assessment dropped from the lips of economics professor Raul Eamets declaring that from April to June our economy essentially did not grow.
With commentators expounding, yesterday, on effects of foreign demand, second quarter slowness cannot be explained by neighbouring troubles alone – as exports did grow considerably, pulled mostly by processing industry and energy. Exports oriented services grew as well, such as logistics and tourism – despite vital trade partners Sweden and Russia having ground to a halt, with Finland in recession. Thus: Estonia’s exporters have proven successful despite weakness on markets of destination, appearing to have some competitive edge.
Construction, however, is still running low. The situation is being explained by building with pollution quota money receding, private investments not compensating the decrease of public ones. Eesti Pank economist Kaspar Oja adds that our industrial capacity has been underused, leading to shelved expansion plans. Among other things, this concerns investments into industrial buildings; that way, foreign demand also having an impact on our builders’ work options. Meanwhile, loans are comparatively cheap and, coupled with wage rise, this should enhance housing construction.
We should also note that, according to Tax Board, June saw a halt in rise of numbers of paid labourers. Even with registered unemployment in constant decline, pre-boom levels have not been reached. And, considering the slow growth of our trading partners, these levels look out of reach for quite some time.
Of course, changes on foreign markets matter a lot, for Estonia. Our economy is largely exports oriented and should the situation in Finland, for instance, markedly deteriorate, we would not escape the effect.
Even so, all is not bad in global economy. The US growth has escalated; EU states’ economic confidence has, over these past months, rapidly improved. This would point towards gradual recovery of the European economy. Improvements in the wider environment should provide a lift to our main trade partners. Therefore, there is basis for both worry and cautious optimism.