Economic downturn accelerated again in the third quarter
In the third quarter of 2023, the gross domestic product (GDP) decreased by 3.9% compared with the same quarter of 2022. The GDP at current prices amounted to 9.4 billion euros.
The GDP at current prices increased by 1.2% in the third quarter. Robert Müürsepp, team lead of national accounts at Statistics Estonia, said that while inflation continues to slow, this has not helped to boost the economy. “There were some signs of economic improvement in the second quarter, but the decline in the third quarter accelerated to the level seen in previous periods. Both value added and tax revenue continued to decrease,” admitted Müürsepp.
Value added fell by 5.1% for non-financial corporations and by 6.5% for financial corporations. The opposite trend continued in the general government sector with a 3.6% increase in value added. The fastest growth occurred in the non-profit institutions sector where value added increased by 6.5%.
The contribution to value added by economic activity was similar to the second quarter. The biggest positive contributor was clearly real estate activities. Trade also maintained the good pace of the previous quarter. There were also considerable positive contributions from agriculture, forestry and fishing, and the energy sector.
Müürsepp noted that, in the third quarter, the weakest performer in terms of value added was transportation and storage, where conditions deteriorated further due to hard times in foreign trade. “The situation in manufacturing is almost as difficult. Other major negative contributors were information and communication, and professional, scientific and technical activities. Both of these activities have often been key drivers of the Estonian economy. Value added also declined significantly in construction,” said Müürsepp.
Private consumption recovered slightly in the third quarter as the decline slowed down to 2.4%. The biggest fall occurred in expenditures on miscellaneous goods and services, and clothing and footwear. There was also a significant decrease in households’ spending on furnishings and household equipment, alcoholic beverages and tobacco, and recreation and culture. Only expenditure on housing increased. For the first time since the first quarter of 2022, government consumption also decreased, by 0.6%.
Investments have continued despite the difficult economic conditions
Year on year, investments increased by about 10% in the third quarter. The biggest contributor was the non-financial corporations sector with a 54.5% increase in their investments in other buildings and structures. The general government’s investments in other buildings and structures grew by 17.1%. The biggest negative contributions came from the decrease in non-financial corporations’ investments in machinery and equipment (‒8.9%) and transport equipment (‒16.2%).
“In the first half of the year, net exports remained positive despite the difficult times. But in the third quarter, Estonia’s imports exceeded exports by 136 million euros. This was due to the fall in exports (‒12.1%) being faster than the fall in imports (‒6%). It means that the share of exports in Estonia’s GDP has fallen to the level of the first quarter of 2020,” explained Müürsepp. He added that, in addition to the deepening decline in exports of goods, exports of services also saw a downturn. While imports of goods continued to decrease, imports of services took an upturn and increased by 6.2%. Foreign trade was negatively affected by sales of electricity, computers and electronic equipment, and various transport services. Foreign trade was boosted by passenger rail transport and computer services.
The seasonally and working-day adjusted GDP decreased by 1.3% compared with the second quarter of 2023 and by 4.0% compared with the third quarter of 2022.
National accounts data show how the Estonian economy is doing. The growth or decline of the economy is mainly measured by GDP and gross national income. The higher these indicators, the better Estonia and the people living here are doing.
Statistics Estonia performs the statistical activity “National accounts” for the Ministry of Finance in order to determine how the Estonian economy is performing.
Statistics Estonia will present the GDP data for the third quarter at a briefing held today at 11:00 on Facebook. Watch it here:
See also the national accounts section on our website.
More detailed data have been published in the statistical database.
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