Estonia's GDP was stagnant in Q3, rising by 0.1% q/q but falling by 0.7% y/y as the economy continues to struggle to emerge from two years of recession, according to preliminary workday and seasonally adjusted data from Statistics Estonia.

In Q2 GDP rose a feeble 0.2% q/q but declined 1% y/y, so the economy is on a slowly improving track, after falling into a y/y decline in 2Q2022.

Estonia had the longest lasting recession in the whole of the EU until it finally achieved q/q growth in Q2. Despite this, in September the centrist government announced an austerity package to bring the budget deficit down to 3% of GDP next year, in order to meet the guidelines of the EU's Stability and Growth pact.

Commenting on the flash estimate of Q3, Luminor’s Chief Economist Lenno Uuskula noted that Estonia's GDP has remained stable for two quarters.

“This reflects ongoing economic weakness and aligns with expectations based on third-quarter data, though it is slightly below the previous forecast,” he explained, ERR.ee, the website of Estonia’s national broadcaster ERR.ee reported.

Luminor’s forecast continues to project a 1% economic contraction for 2024 compared to 2023, indicating that Estonia’s economy is still on a downward path. The EBRD predicts the economy  to shrink by 0.8% in 2024.

Private consumption remained weak in the third quarter, with some households choosing to spend savings on cars ahead of next year’s anticipated car tax, reducing other consumption options.

Industrial production and exports are still struggling, with key sectors experiencing a slump and only limited new orders, signalling that a return to previous activity levels remains uncertain, ERR.ee said.