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In the 1st quarter, GDP fell by 0.7%

Posted on 29. May 2020 11:00

According to Statistics Estonia, in the 1st quarter of 2020, the gross domestic product (GDP) fell by 0.7% compared to the 1st quarter of 2019. The GDP at current prices was 6.5 billion euros.

Value added grew by 2%, driven primarily by information and communication and construction. Economic growth was hindered mainly by the energy sector, mostly due to warm winter and reduced heating costs. Of larger economic activities, manufacturing, which began to decline already in the second half of 2019, had a negative impact on economic growth.

According to Robert Müürsepp, leading analyst at Statistics Estonia, the impact of the coronavirus was not yet considerable. “However, the virus seems to have negatively affected trade, transport and accommodation and food service activities,” he added.

The main reason for the economic downturn are net product taxes, which fell in the 1st quarter by 18.8%, mainly due to a drop in VAT and fuel excise duty receipts.

Household consumption growth also decelerated markedly to only 0.3%, which is the most modest growth since the last major crisis.

“Investments declined by 6.9%, but not due to the coronavirus but rather because manufacturing has shown a long-term downward trend and the investment level in the 1st quarter of 2019 was very high,” explained Müürsepp. Investments by enterprises into transport equipment and machinery and other equipment dropped the most. At the same time, the investments of the government sector into buildings and structures and households’ investments into dwellings increased.

In the 1st quarter, exports dropped by 2.6% and imports by 5.2%. Similarly to manufacturing, foreign trade slowed down already last year. The exports and imports of goods declined at the end of last year and were now followed by foreign trade in services. The main contributors to the decline were electronic equipment and travel services.

Compared to the 4th quarter of 2019, the seasonally adjusted GDP fell by 3.7% and compared to the 1st quarter of 2019, by 0.8%.

Statistics Estonia performs the statistical activity “National accounts” for the Ministry of Finance.

More detailed data have been published in the statistical database.