Bank of Estonia: Third quarter economic growth driven by exporting branches

Bank of Estonia (Eesti Pank) economist Kaspar Oja.
Bank of Estonia (Eesti Pank) economist Kaspar Oja. Source: Bank of Estonia

The Estonian economy grew by 4.2 percent on year in the third quarter of 2019, and 1 percent on quarter. This growth was driven by exporting branches, while one-off factors played a significant role as well, Bank of Estonia economist Kaspar Oja said.

Global trade is being restrained by trade barriers and problems in several individual sectors, and thus exports were down in almost all economic areas in the third quarter. It should be noted, however, that although trade declined practically everywhere, industrial output still increased in some areas, indicating that value chains have changed, Oja said in a press release on Friday.

Production has not declined as much as trade has, and has likely been partly relocated. Industrial output increased in China, the U.S., Central and Eastern Europe as well as the Nordic countries.

Thus far, Estonian companies have coped well with problems in global trade. Exports increased by 7 percent at constant prices, with growth in the exports of both goods and services contributing. The growth in exports is reflected in manufacturing and information technology (IT) as well as by the rapid growth in business services.

Growth in the economy was supported not only by positive developments in exports, but also by temporary factors as well. A cut in the alcohol excise duty increased the contribution of net taxes to growth, partly because purchases were deferred in the second quarter. There was also a sharp increase in the value added of agriculture, which makes a very variable contribution to growth in the economy.

Growth was held back, meanwhile, by the oil shale sector, where problems were caused by the decline in the competitiveness of oil shale electricity as a consequence of European climate policy.

Though economic growth remained fast in the third quarter, businesses expect that it will slow int he future, Oja said. The general cooling of the global economy will also gradually cool the Estonian economy as well.


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Editor: Aili Vahtla

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