The second quarter saw no economic turn

Andres Saarniit, Adviser of the Economics Department of Eesti Pank

The volume of the Estonian economy was 1.4% smaller year-on-year in the second quarter of 2008. Compared with spring, the global economic growth outlook has worsened with growth indicators being volatile. In this context, it is logical that there occurred no pivotal changes in economic growth in the second quarter in Estonia. Only a sharp improvement in export opportunities would have been able to make up for the expected weakening of domestic demand against the backdrop of last year's rapid growth.

The economic downturn was caused by the continued decline in domestic demand, while the fields of activity related to exports supported growth. Looking ahead, the deterioration of the global economic outlook will not be conducive to a noticeable pick-up in Estonia's exports in the next months. In addition, the uncertainty of consumers and investors does not allow forecasting a rapid increase in private consumption and investment. However, this year's positive messages are likely to be related to domestic demand rather than exports.

Looking at the spring forecast of Eesti Pank it can be said the economy is following the scenario which expected a fast decline in domestic demand at the beginning of 2008 and a re-acceleration of growth during 2009.