Estonia's economic growth accelerated in the second quarter of 2018 thanks to construction, manufacturing and professional activities. The Baltic country, a member of the European Union and of the eurozone, saw its gross domestic product (GDP) growing by 3.7% compared to the same period of the previous year, reaching 6.4 billion euros at current prices, according to Statistics Estonia.
Seasonally and working-day adjusted GDP grew by 1.4% compared to the previous quarter. However, compared to the second quarter of 2017, the seasonally and working-day adjusted GDP grew by 3.7%.
For the sixth quarter in a row, the main contributor to the country's economic growth was the growth of value added in construction. It was followed by increasingly stronger manufacturing witch the largest contribution in three years. Significant contributors to the growth were also professional, scientific and technical activities, transportation and storage and information and communication. The main activities to have a negative impact on the growth were agriculture, forestry and fishing, energy and administrative and support service activities.
Domestic demand grew by 4.5% in the second quarter. Gross fixed capital formation, which fell by 0.8%, continued to negatively impact domestic demand. Slower investment activity was present in all asset types across the entire nonfinancial enterprises sector. At the same time, gross fixed capital formation grew in all other sectors. Final household consumption grew by 4.0%, which was similar to the growth in the previous quarter.
The exports of goods and services grew by 5.9% in the second quarter. The exports of goods recovered from the downturn in the first quarter and grew by 5.0%. This was mainly due to growth in the exports of computers, electronic and optical equipment, motor vehicles, trailers and semi-trailers and wood products. The fast growth in the exports of services was mostly influenced by computer services and services supporting transportation and storage. The imports of goods and services grew by 7.0% in the second quarter, with the imports of services growing by 11.0%. The share of net exports in the GDP was 3.6% in the period under review.
In spite of faster economic growth, there was no significant growth in productivity. Productivity per hour worked grew only by 0.7%. Productivity per person employed grew by 1.0%. As a result of a slight slowdown in the growth of wages, the growth of unit labour cost was somewhat slower than in the first quarter when it was 4.3% Statistics Estonia said.
GDP Growth Rate in Estonia averaged 1.01 percent from 1995 until 2018, reaching an all time high of 4.80 percent in the first quarter of 2004 and a record low of -9.10 percent in the fourth quarter of 2008, according to Trading Economics.
Last month, the Estonian Ministry of Finance published its summer economic forecast. According to the forecast, Estonia's economic growth is set to grow by 3.6% this year and by 3% in 2019 and remain close to 3% till 2022.
Estonia’s advanced and competitive economy supports from established multinational companies to high growth startups. The country consistently ranks among world leaders in human capital and ease of doing business and has a two-decade track record of successful investments and innovations.