Growth in the Estonian economy in the fourth quarter was aided by the lack of restrictions
Eesti Panga ökonomist
Estonian GDP was 1.2% smaller in the fourth quarter of last year than it was a year earlier. Growth was reined back by branches of the economy that were subject to restrictions, such as accommodation, food service and entertainment. GDP growth was also brought down by agriculture, which is a volatile sector. Several branches of the economy, such as IT and finance, did relatively well.
Retail sales in Estonia at the end of the year were much stronger than in many other European Union countries. This is a consequence of the looser restrictions, as the performance of the sector focusing on the domestic market depends largely on the restrictions in Estonia. The expectations of businesses have also become more optimistic than elsewhere in Europe. Developments in the output of the exporting sector have been similar to those in other countries of the European Union, as the performance of the sector depends more on restrictions in other countries.
It is notable in the exporting sector that the turnover of businesses showed a much better picture in the fourth quarter than growth in output did. Exports of goods were up 14% in the fourth quarter, but value added in manufacturing continued to fall. Companies were selling down their inventories in warehouses rather than increasing production. Corporate surveys indicate that shortages of labour and equipment limited production more than they did previously. It is possible that in the climate of uncertainty companies reduced their inventories deliberately to free up the cash locked up in them.
Mobile positioning data show that life continued to return to its usual rhythm in October and November despite the increase in infections. There appear to have been fewer people in Estonia than in other countries in the European Union who continued working remotely. Restrictions were tightened in December and the share of people not going to their workplaces then increased again, before falling once more at the start of the new year. People in most of the other countries of the European Union have not returned to work as quickly.
Although the restrictions affected the economy only modestly in the fourth quarter, it should be remembered that the stricter restrictions started to apply only in December, and so they could not have had a major impact on GDP. The restrictions have affected parts of the economy with low wages and low productivity the most, and so their economic impact is much smaller than their social impact. The number of people affected by the restrictions is proportionally larger than their footprint in the economy.
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