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EKI: Estonia's current economic situation is comparable to 2010

A supermarket checkout.
A supermarket checkout. Source: Priit Mürk/ERR

The current situation of the Estonian economy is similar to 2010 due to insufficient demand and low international competitiveness, the Estonian Institute of Economic Research (EKI) believes.

The majority of experts – 69 percent – asked by EKI to describe Estonia's economic situation in December said it was bad, while 31 percent said it was satisfactory.

The Economic Confidence Index, which combines the assessments of Estonian business managers and consumers, is the lowest in the region.

"The future expectations and confidence of companies and households have fallen well below the EU average, and cannot be compared with Latvia or Lithuania, where the economic confidence index is significantly better than ours," said Peeter Raudsepp, institute director, on Wednesday.

He added that the economy will not improve by itself as both the unemployment rate and prices are increasing.

The economic confidence index calculated by EKI was 78.5 points in Estonia in December, which is 0.4 points lower than in September. This is the lowest result since June 2020, during the coronavirus pandemic. In December 2023, the economic confidence index was 95.9 points in Latvia, 99.6 points in Lithuania, 80 points in Finland, and 82.3 points in Sweden. The European Union average is 95.6 points.  

The EKI's graph shows a comparable situation with 2010. Source: EKI

The surveyed experts consider insufficient demand and lack of international competitiveness to be the two biggest economic problems. These are followed by an unfavorable environment for foreign investors and a lack of trust in the government's economic policy.

A year ago, the biggest problem was a lack of skilled labor which has now dropped to third place.

Consumer confidence remains weak and significantly below the long-term average. This has been affected by the recession, shrinking purchasing power, rising costs, rising unemployment, the war in Ukraine, and upcoming tax increases.

In December, 55 percent of families believed their financial situation had worsened compared to 12 months ago, 33 percent said it remained the same, and 11 percent of families thought it had improved.

Looking at the next 12 months, 50 percent of respondents said things would get worse. Only 11 percent saw signs of improvement, while 10 percent could not answer.

EKI's food basket rose in price by 0.1 percent in the fourth quarter from €116.28 in September to €116.40 in December. Meat products and eggs were the most expensive items in the shopping basket, while vegetables and apples saw the biggest price drops.

Compared to December 2022, the price of the food basket has increased by 4.8 percent, from €111.09 to €116.40. 

EKI experts mostly agree that inflation will fall over the next six months.

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Editor: Valner Väino, Helen Wright

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