Recession slowed down in the second quarter. Photo: Shutterstock
According to Statistics Estonia, the gross domestic product (GDP) decreased by 2.9% in the second quarter of 2023 compared with the same quarter a year earlier. The GDP at current prices amounted to 9.4 billion euros.
The GDP increased by 5.1% at current prices. “Despite a considerable slowdown in inflation in the second quarter, the overall economic situation has not improved substantially,” said Robert Müürsepp, team lead of national accounts at Statistics Estonia. “To date, the Estonian economy has been in significant decline for three consecutive quarters. There was a decrease in value added in most economic activities as well as in tax revenue adjusted for price changes. However, the recession in the second quarter was slightly slower than in previous quarters,” Müürsepp added.
Value added of non-financial corporations fell by 4%. By contrast, the value added of general government, which had previously been the exception to the downward trend, grew again this quarter, this time by as much as 4.5%. The non-profit sector, which had been in decline since the end of 2021, managed to show growth of 1.1% in the second quarter.
By activity, the largest positive contribution came from trade. Thanks to slower price growth, trade in the second quarter returned to pre-pandemic levels. Real estate activities also made a noticeable positive contribution. The contributions of the remaining positive performers were modest.
The biggest drag on the economy was transportation and storage. The energy sector and construction made significant negative contributions as well. The economic downturn was also caused by professional, scientific and technical activities, information and communication, and financial activities. In addition, growth has come to a halt in accommodation and food service activities, which previously grew strongly after the Covid-19 crisis.
Private consumption has now decreased for four consecutive quarters, and it fell at an accelerating pace by 3.3% in the second quarter. The decline was mainly driven by lower expenditures on other goods and services, recreation and culture, and furnishings. Private consumer spending on transport, communication, restaurants and hotels, and education increased.
Government consumption grew for the first time in a long time, increasing by 1.8%.
“Investments also had a weaker quarter, falling to the pandemic-time levels (−18.7%),” said Müürsepp. Non-financial corporations were the main contributors to the decline, seeing a decrease in investments mainly in other buildings and structures (−53.8%), machinery and equipment (−34.6%), and transport equipment (−39.2%). The largest positive contribution came from households, which increased their investments in dwellings (14.7%).
The poor international economic situation was reflected in foreign trade. Exports continued at the pace of the previous quarter, falling by 6%. The fall in imports deepened to 9.1%. “However, it is encouraging to see an increase in exports of services, led by transport, advertising, and computer services,” Müürsepp added. Exports of goods decreased mainly due to lower sales in the activities of electricity supply and manufacture of wood. The same groups of goods also contributed to the fall in imports of goods. The drop in imports of services was mainly driven by transport services. Net exports remained positive for the second quarter in a row, despite the generally poor economic environment.
The seasonally and working-day adjusted GDP decreased by 0.2% compared with the first quarter of 2023 and by 3.0% compared with the second 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.
See also the national accounts section on our website.
More detailed data have been published in the statistical database.
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