Oja said that, according to an earlier flash estimate provided by Statistics Estonia there ought to have been a slowdown in the contraction of Estonia's GDP. However, the data from the last month has changed that assessment.

"If you consider what's behind that, I think in the big picture of Estonia's economic performance, what has become much worse is the performance of the export sector. Goods exports have been very weak recently. If you look at the last two years, in the summer of 2022 there was a fall in exports, which we can explain by the fact that cheap raw materials from Russia disappeared. After that, the level of exports remained relatively stable, but since the spring there has been a further fall in exports," Oja said.

Initially, it was Estonia's exports to the Scandinavian market that fell, while the decline in exports to the euro zone market has deepened since spring. In the euro zone the tightening of monetary policy has started to have an impact on demand. According to Oja, reduced competitiveness is also playing an important role, and this is something underlined by businesses.

Asked whether, in light of the changed circumstances and the third quarter (Q3) results, it is possible that the full-year growth forecast for the 2024 ought to be revised downwards, Oja said the central bank would only publish its forecast in mid-December.

"But, if we look at the change in the forecast for external demand, with the change in the data, whereby, the third quarter is now significantly worse than previously thought, then I personally believe economic growth could be replaced by zero or a slight decline next year. We may also see that we end up having three consecutive years of recession," Oja said.

"To some extent this risk was known before, maybe the growth expectations we foresaw for European countries were too optimistic and these markets will not do as well as forecast two or three months ago. In terms of growing out of the crisis, perhaps it is not so important to talk about the next few quarters, but instead to think about what will happen in the years to come, or how to make sure the recovery does not stall, but is a serious recovery. We need to discuss what Estonia's competitive advantages will be in the future," Oja said.

On Thursday, Statistics Estonia said Estonia's gross domestic product (GDP) for the third quarter of 2023 was down 3.9 percent compared to the same period in 2022.

However, the recession has been slow to hit the Estonian labor market and has affected some areas more than others. "You can't say the recession has had no impact on employment," Oja said. "We'll probably see a decline in employment and also an increase in unemployment here for some time to come," Oja said.

Oja did not rule out a return to economic growth over the next year, but emphasized that the extent of the crisis has clearly deepened.

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