Economic growth decreased in the 1st quarter

Photo: SCANPIX

According to the second estimates of Statistics Estonia, the gross domestic product (GDP) of Estonia decreased 1.4% in the 1st quarter of 2014 compared to the 1st quarter of the previous year.

In the 1st quarter, the GDP at current prices was 4.4 billion euros. Compared to the 4th quarter of 2013, the seasonally and working-day adjusted GDP fell by 0.7%.

The GDP deflator, which describes the co-effect of all price and volume indices, decelerated to 4.1% in the 1st quarter. Therefore, the GDP growth at current prices also decelerated to 2.6%.

In the 1st quarter of 2014, the GDP was driven the most by a rise in the value added in professional, scientific and technical activities, mining and quarrying, and public administration and defense activities.

Similarly to the previous four quarters, the value added in transportation slowed the Estonian economy down the most in the 1st quarter of 2014 as well. The decrease in transportation was mainly caused by a decline in the warehousing and support activities for transportation. In addition, in the 1st quarter of 2014, a decrease in the value added in construction and energy slowed the GDP growth down substantially. The decline in construction was mainly caused by a drop in the construction of buildings and structures. The decrease in the value added in energy is mainly caused by the partial replacement of own production with imported electricity.

Due to the weak external demand, there was a decrease in the exports of both manufacturing, which is the largest economic activity in Estonia, and the goods of total economy in the 1st quarter of 2014 compared to the same quarter of the previous year. The export of goods decreased for the third quarter in a row, being influenced the most by a deceleration in the export of electronic and chemical products. At the same time, exports of services grew 8.5%. Compared to the same period of the previous year, the import of goods and services increased at real prices by 3.5%. Net export was negative in the 1st quarter of 2014, amounting to -0.6 of the GDP. The previous time that import exceeded exports was in the 1st quarter of 2013.

Despite weak external demand, Estonia’s economy was substantially supported by growing domestic demand. Domestic demand increased at real prices by 2.1%, mainly due to the household final consumption expenditure. Household final consumption expenditure increased at real prices by 2.3%, mostly due to a rise in the expenditures on clothing, food, non-alcoholic beverages and the operation of personal transport equipment. The growth in domestic demand was also supported by other components. Gross fixed capital formation increased at real prices by 3.5%. The growth was mostly influenced by the investments in transport equipment by the sector of non-financial corporations. At the same time, the investments of non-financial corporations in buildings and structures and the investments of the general government sector decreased. Inventories increased mainly due to a growth in the inventories of the goods and supplies of the business sector.

In the 1st quarter, domestic demand was smaller than the GDP, accounting for 99.8% of the GDP.

Real growth of the GDP, exports and imports of goods compared to the same period of the previous year, 1st quarter 2010 – 1st quarter 2014

On 21 May 2013, European Parliament and the Council adopted Regulation (EU) No 549/2013 on the European system of national and regional accounts in the European Union (ESA 2010). From 1 September 2014, all Member States will change the current methodology, ESA 95, to a new methodology, ESA 2010. Statistics Estonia will publish revised estimates for the 1st quarter 2000 – 2nd quarter 2014 on 8 September 2014. The revised estimates for the 1st quarter 1995 – 4th quarter 1999 will be published by Statistics Estonia in 2015.