Estonian Economy and Monetary Policy 1/2024
The Estonian economy is on the threshold of growth. Estonian GDP has by now been falling for two years in a row and the current recession has proven longer and more persistent than earlier episodes. The long decline has been driven by problems that have accumulated and magnified
one another, though these are by now being resolved or are very likely to be overcome in the near future. Economic activity will be given a boost by commodities having become cheaper, prices for fuel and energy having come down from their peaks, supply problems being eased, exchange rates having become more favourable, inflation being lower, and interest rates being cut. Real incomes for people will continue to improve, which will re-engage consumer spending and growth in the economy. The return of growth in the economy will be encouraged by the strong resilience of the labour market to the economic difficulties it has faced so far, because the high level of employment and low rate of unemployment will allow consumption to recover quite evenly across society. There remains a lot of uncertainty and doubt about the future throughout the whole region, primarily because of geopolitical problems, but there are increasing signs of the economy stabilising, laying the foundations for future growth in economic activity.
