Economic growth resumed at end-2009
Peeter Luikmel, Eesti Pank, economist
According to the flash estimate of Statistics Estonia, Estonia's seasonally adjusted GDP grew 2.6% in the fourth quarter of 2009 compared to the third quarter. Year-on-year, the fourth quarter's GDP declined by 9.4%, which continues to point to slowing contraction.
Estonia's sustainability-oriented fiscal policy improved the credibility of the country's economic environment. At the same time, the general government's direct impact on growth was reduced by expenditure cuts. The stocking up of end-2009, before the excise duty rises, provided an one-off stimulus to growth.
Estonia's exporters have been able to make use of the possibilities arising from the recovery of the external environment. Like in previous quarters, exports were the chief factor boosting economic activity. Statistics show that the export volumes of December 2009 were already approaching the levels recorded in December 2008. Exporters will continue to have a strong impact on growth also in the coming quarters.
Growth is hampered by weak domestic demand. Private consumption is decreasing due to growing unemployment. Compared to the boom years, production resources are underexploited because of the notably weaker demand environment. This has also kept investment activity sluggish.
The fourth quarter's GDP flash estimate is in compliance with the base scenario of Eesti Pank's autumn forecast, which expects last year's economic contraction to be 14.2%.
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