Gross domestic product decreased in the 2nd quarter

Compared to the 1st quarter, the GDP, chain-linked by the reference year 2000 and seasonally and working-day corrected, decreased by 0.8 %.

The decrease in the GDP was mostly influenced by the weak domestic demand and at the same time by the decrease in exports of goods and services.

Compared to the same quarter of the previous year, the domestic demand decreased by 2.8% primarily due to the decrease in private consumption and capital investments (-2.0% and -2.5%, respectively). Private consumption decreased mainly due to the decrease in expenditures on transport and clothing and footwear. The growth of expenditures on food and non-alcoholic beverages decelerated. Capital investments decreased in financial and household sector. Investments by manufacturing were almost on the same level as in the same quarter a year ago. At the same time, investments in construction by the general government sector continued to grow fast.

The decrease in exports and imports since the second half of the previous year deepened in the 2nd quarter this year even more. Compared to the 2nd quarter of the previous year, exports of goods and services decreased by 4.9% and imports by 8.2% by chain-linking method. Exports of goods decreased by 3.2% primarily due to the decrease in exports of refined petroleum products. At the same time, exports of basic metals and electrical machinery (electrical motors and appliances), having considerable influence on exports, increased. Exports of services decreased by 8.9% primarily due to the decrease in exports of services for railway cargo, airway passengers and cargo transport and trade related exports services. The decrease in imports of goods was influenced mainly by the decrease in imports of refined petroleum products and motor vehicles. While imports decreases faster than exports, the deficit of net exports in GDP has increased since the second half of the previous year and amounted to -4.6% in GDP in the 2nd quarter this year. In the 1st quarter the indicator was -7.1% and in 2007 on an average -10.9% in GDP.

Growth in GDP, domestic demand and exports of goods and services
by chain-linking method, 1st quarter 2004 – 2nd quarter 2008

On the supply side the deceleration of the GDP was influenced mainly by the decrease in the value added in wholesale and retail trade, transport and storage, manufacturing and electricity, gas and water supply activities. The value added in financial intermediation activities also decreased.

The decrease in the value added in manufacturing was mainly caused by small domestic demand and decrease of orders resulting from it. A significant impact was the decrease in the value added in the manufacture of wood, furniture, building materials and food. At the same time the value added of manufacturing was supported by the growth of value added in the manufacture of metal products and electrical machinery and apparatus. The decrease in the value added of electricity was caused by a partial replacement of own production with the imports of electricity. Rapid price increase and small domestic demand caused the decrease in the value added in wholesale and retail trade activity. The value added in wholesale trade has decelerated especially fast. In transport the value added of railway transport is continuously decreasing rapidly. This economic activity was affected the most by the decrease in the value added in other land transport (road transport and passenger transport). The value added in construction activity increased in current prices. As the growth of construction prices has considerably decelerated compared to the same period of the previous year, in some expenditure groups even decreased, there was also a real growth in the value added in construction activity calculated by chain-linking method.

The value added in financial intermediation decreased due to the fast deceleration in the growth of financial and interest income, fees and commissions’ income, as well as due to the increase in interest rates on loans.

Growth of value added of economic activities by chain-linking method, 2nd quarter 2008

Preliminary estimation of the GDP growth has been calculated according to the new methodology. Whereas, Statistics Estonia previously calculated the GDP growth at the constant prices of fixed year 2000, henceforth the growth is calculated by chain-linking method in which the year preceding the accounting period is applied as a base year. The new methodology enables to measure the economic activity more accurately and ensures better international comparability of data. The majority of the EU and OECD member states use the chain-linking method in calculating the GDP growth, and the requirement to apply this method proceeds from the EU legislation.

Statistics Estonia published today the GDP time series calculated by chain-linking method since the year 2001. Discrepancies between the GDP quarterly growth rates calculated by the two methods remain between -1.6 and +0.2 percentage points. In addition to the changeover to the chain-linking method, the GDP growth correction includes the regular GDP revision for 2004–2007 according to the Supply and Use Tables and Structural Business Survey.

GDP growth rates by chain-linking method and at 2000 constant prices,
1st quarter 2001 – 2nd quarter 2008

The revised GDP for years 1995–2000 calculated by chain-linking method will be published by Statistics Estonia in December.

Additional information on chain-linking method is displayed on the web site of Statistics Estonia: Statistics > Subject areas > Economy > National Accounts.