Swedbank believes economic growth will remain at 0.5 percent of GDP this year and fall to zero in 2023.

Inflation is currently over 20 percent and has been for most of the year which has reduced customers' purchasing power.

Swedbank's senior economist Liis Elmik said it will take several years to recover from the fall.

"According to our calculations, we will only reach last year's living standards in five years' time," she told Tuesday's "Aktuaalne kaamera".

While prices have risen, consumption has not yet fallen. The economic situation is now causing consumers to dip into their savings.

Data from the Bank of Estonia shows that while Estonian savings accounts have been growing for the past decade, they have been receding since May.

"During the pandemic, deposits grew very rapidly, but now we can see that over the summer months deposits in Estonia have fallen by €50 million. Although this is a big number, in percentage terms it is only 0.5 percent," said Elmik.

Bank of Estonia economist Taavi Raudsaar said with vital expenditure rising, people have less money to spend elsewhere.

"For a while, this can be compensated, so to speak, by savings accumulated in the past. But given that many people in Estonia do not have a lot of savings, sooner or later private consumption expenditure will also start to decline," he told AK.

Luminor Bank said it has not seen a dip yet but customers are acting more cautiously. According to their data, 36 percent of customers have postponed buying a home.

Tanel Rebane, head of personal banking at Luminor, said customers are reassessing their situations and future plans.

"Yes, we can all see for ourselves that prices are going up, they have gone up by more than 20 percent in a year, it has reduced people's incomes. And the other thing that has happened very quickly recently is related to the increase in the cost of credit," he said.

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