Growth gets stalled

Illustration: graafika: Silver Alt

Statistical Office says Estonia’s 2013 final quarter initial GDP growth remained flat, year-on-year. Overall, economy only expanded 0.7 per cent from 2012 to 2013.

During the last quarter, effect of processing industry growth proved the most positive. For SEB economist Ruta Arumäe, this was a surprise. The reason, she thinks, lies in differing price movements.

«Production prices have increased more than consumer prices. Meaning that input prices have risen almost uniformly, while output prices have risen in varying ways – and have occasionally dropped,» explained Ms Arumäe.

«A conclusion one involuntarily arrives at, by the data, is that as processing industry has, in these difficult circumstances, remained the main economical growth engine, then the rest of the economy had to be weak indeed,» added the economist.

While the biggest positive factors, at last quarter of 2013, also included trade and information/communication, the main brake – as over the entire year – was transportation. Commenting on the weakness of transportation and transit, the Port of Tallinn CEO Allan Kiil said they would keep on building and, this year, various new projects ought to be completed.

Other «leading shrinkers» of the 4^th quarter were agriculture and construction. A cause for construction sector to shrink, as assessed by the Swedbank chief economist Tõnu Mertsina, was decrease of state investment into buildings and civil engineering works; and, construction being heavily dependent on foreign money and state orders, no quick recovery is to be expected in the sector.  

At the estimation of Eesti Pank, energy sector also played a role in the sluggishness of GDP growth in 4^th quarter; due to milder weather, heat production was down buy a sixth, year-on-year. According to Eesti Gaas, it was true that energy consumption decidedly decreased over the last quarter, the main reason being the exceptionally warm December.

While slowing down economic growth, the low heating bills at least eased – temporarily – the budget tensions of most households and enterprises. At that, consumption decisions of households have become bolder – in addition to essential goods, increasing amounts of durable goods were purchased.

While the stalled economic growth served a disappointment to most analysts, optimism still abounds regarding this year, growth expected to gather momentum. Swedbank, for instance, believes the 2014 growth will speed to 3 per cent. Pursuant to Eesti Pank December forecast, economic growth will accelerate this year, to 2.6 per cent.