Economy grows 4.2 percent in third quarter of 2017

Estonia's GDP increased 4.2 percent on year in the third quarter of 2017, Statistics Estonia reported on Thursday.

In the third quarter, the GDP at current prices was €5.8 billion. The seasonally and working-day adjusted GDP remained at the same level compared to the second quarter of 2017 (with growth of 0.3 percent), but grew by 4.2 percent compared to the third quarter of 2016.

As in the previous quarter, the biggest contributor to GDP growth was construction, which grew rapidly for the third consecutive quarter. Other primary contributors to GDP growth were information and communication, mining and quarrying, professional, scientific and technical activities, manufacturing, transportation and storage and administrative and support service activities, which have previously shown rapid growth. The biggest increase in value added continued to occur in mining and quarrying.

The main hindrance to economic growth was energy, due to a fall in its value added. Although the value added of energy grew at current prices, an increase in prices in electricity, gas, steam and air conditioning supply had a negative impact in real terms. Trade, real estate activities and other unspecified service activities and financial intermediation likewise had a negative impact in real terms.

Although net taxes on products increased at currents prices, GDP growth was slowed down by net taxes on products at real prices. VAT receipts increased but excise tax receipts declined compared to the same period last year.

The exports of goods and services in the third quarter of 2017 remained at the level of the third quarter of 2016 in real terms. The imports of goods and services increased 4.2 percent. Primary positive contributors to imports were basic metals, motor vehicles, trailers and semi-trailers and other machinery and equipment. The biggest negative contributors to foreign trade were the exports and imports of electronic equipment.

Net exports totaled roughly €300 million, accounting for 5.2 percent of the GDP.

In the third quarter of 2017, compared to the same period last year, the number of persons employed and the number of hours worked grew at a similar rate, but still more slowly than the GDP, and, therefore, real labor productivity per person employed and per hour worked grew 1.6 percent and 1.9 percent, respectively. As labor costs grew faster than real labor productivity per person employed, the nominal unit labor cost reached 4.8 percent.

Domestic demand grew by seven percent as all of its components strengthened. The growth in domestic demand was driven by gross fixed capital formation. Although the acquisition of fixed assets in the non-financial enterprises sector fell, also sales of fixed assets decreased significantly, and, thereby, the gross fixed capital formation in the third quarter increased by 13.2 percent in real terms. Investments increased in all the sectors, but the main contributors to the growth were the investments into buildings and facilities by the government sector and into machinery and equipment by non-financial enterprises.

The final consumption expenditures of households grew by 3.5 percent. With the expenditures on clothing and catering services having the biggest positive impact, and the biggest negative impact coming from expenditures on alcohol and tobacco.

Editor: Aili Vahtla

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