The geopolitical tensions that are overshadowing the global economy have also reached Estonia, though their impact on the economy has not particularly been felt yet. War in the Middle East, trade restrictions and general uncertainty have chilled the external environment and increased risks, but the Estonian economy still continued to recover in the first half of the year. It was supported in this above all by strong domestic demand, which was boosted by an expansive fiscal policy. Geopolitical problems lasting for longer and becoming more intensive could however arrest the recovery in the economy through deeper supply problems, elevated energy prices, or higher interest rates.
