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Initial data tells us Estonia’s GDP shrunk 1.9 percent year-on-year in opening quarter of 2014. The tradition is to call it a recession if decline persists for two quarters running. No need to sink deep into pessimism just for January-March alone; even so, those that deemed the finance ministry’s 2014 growth forecast cut by two percent too optimistic still have scored a point.
Economic growth is in no way the supreme truth about how people are dong, in Estonia. Having had a rather mild winter and therefore consuming less energy, the economic figures suffered – while the people rejoiced getting the smaller heat bills. Were it for the warm winter alone, we might be poking fun at the statistics ignoring the sun-heated rooms we lived in.
Regrettably, however, the 1.9 fall in GDP is no laughing matter at all. First and foremost we are worried about how the neighbours are doing – the ones with whom we have close economic ties. For instance: any backlash in the Finnish economy would fall on us with just a tiny delay. Finland’s outlook hasn’t been the rosiest for a while now, as their structural problems are common knowledge. By the European Commission, the Finns are only predicted 0.2 percent of economic growth; in a interview to Postimees, yesterday, the Finnish President Sauli Niinistö said at least it wasn’t a minus... While in Estonia, unemployment statistics provide for cautious optimism (as compared to March, registered jobless numbers shrunk in April), a worsening of the situation on the Finnish labour market would immediately send many Estonians back home – thus probably boosting the ranks of the unemployed. Still, not all the tidings are bad: in Estonia, the first quarter brought a minus, but Latvia and Lithuania grew.
With two weeks to go till elections, a drop in the economy is a tender thing to discuss in domestic policy. By IRL now outside of the government for just a while, it is hypocritical to blame the drop on the new government’s policy. As the new policy and the impact of the 2015 budget will only hit real economy sometime later. The bigger question mark would be whether in Europe as a whole the expected recovery will show up – or not. For the situation in Estonia, all political powers share the responsibility: both those in power these past years, and those at helm in Tallinn. Blaming one another will not add a single percent to the GDP; better to give an essential effort towards stopping the cooling – the best the powers can do.