Estonian Economy and Monetary Policy 2023/1
The Estonian economy has suffered from a decline in purchasing power and competitiveness. Statistics Estonia finds that the Estonian economy shrank by 1.3% last year. The figure for growth in the Estonian economy last year was weaker than those in other European Union countries. Estonian companies had to cope with rapidly rising energy costs and with supply problems and sharp price rises for raw materials. The decline was also worse because the Estonian economy reached the peak of the economic cycle very quickly after the pandemic, as companies perceived the same signs of overheating in the economy at the end of 2021 that they did during the boom of 2007. Estonian companies consider the state of the economy in early 2023 to be around its average level. The decline in purchasing power has been a notable obstacle for companies that focus on the domestic market, but cost pressures and competitiveness problems are even more of a challenge for branches of the economy that export. Changes in international competitiveness will be of critical importance for future growth in the economy.