4.1 percent is a really big number, and it's very difficult to cite an equivalent to it within Europe, because even in Sweden, where the economy is in bad shape, they saw a downturn of just 0.9 percent last quarter, Nestor said.

Statistics Estonia announced Wednesday that Estonia's GDP shrank by 4.1 percent on year in the fourth quarter of 2022, with an overall downturn for the year of 1.3 percent.

According to Nestor, it must be taken into account that these figures will subsequently be adjusted, and that the revised estimate placed last year's third-quarter downturn, for example, at 3 percent already.

"And there was a tiny downturn in the second quarter," he continued. "Those were actually the times when the Estonian economy was still doing pretty well."

The economist noted that last year's high reference base means that Estonia's economic growth will remain negative in the first and second quarter of this year as well. As the economy was already in decline in the second half of 2022, however, the Estonian economy is expected to revert back to growth again in the third and fourth quarters.

"It won't be difficult at all to achieve a positive number in the second half of the year; economic growth should definitely recover in the second half," he said.

According to Nestor, the previous two quarter's significant economic downturn nonetheless hasn't really been reflected in the country's economic activity.

"We're talking about real growth, where inflation has been taken into account," he explained.

"But if we're talking about nominal growth, where inflation isn't taken into account, that was a growth of 12 percent in the final quarter of last year," he continued. "And that is also why the current economic downturn is statistical — why it's difficult to grasp in the economy itself. You can see that people are continuing to consume, and life is moving on. It goes unnoticed because prices are increasing so rapidly as well."

The Nordics' poor economic situation is also an area of concern for Estonian manufacturing. The real estate sector there is reeling currently, which has seriously reduced orders in the industry, Nestor noted.

"The construction market there has ended up very, very quiet, and for many Estonian construction companies, this has been the primary market where they have sold their goods," he explained. "Recovery there will certainly not happen very quickly; it may take a year or two. This is a period of low demand that must be overcome."

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