Experts: Estonian economy will take time to recover | news

LHV’s economic analyst, Heido Wittur, said that Estonia’s current economic situation is stable but poor.

„This 2.9 percent should be understood as the whole economy. If we look at the real economy, industry and other productive sectors of the economy, there was a decline of four percent. The small improvement in GDP came from the government sector. , because the value added there increased and affected the size of (Estonia’s) total GDP” said Witcher.

According to Wittur, the main reason for this is still high inflation, which, in real terms, takes up 5-6 percent of GDP. „Without it, we’d be in the black.”

The second factor is the level of economic pressure in Europe and the rest of the world. Demand in markets is low and producers have nowhere to sell their produce, Whitsour said.

Whitsour pointed out that people have more money in their pockets, but its value is being eroded by inflation. „People are spending more money, but they’re able to buy less. Fortunately, though, inflation has slowed, so the gap we had last year is wider than this year.”

In their latest forecasts, the central bank and other major banks predict that the economy will start to improve next year. According to Whitsure, every downturn is followed by a boom. However, it will take long-term improvements as things stand before Estonia returns to pre-recession levels.

According to SEB’s economic analyst Mihkel Nestor, there are no encouraging signs when it comes to the economy in the second quarter (Q2) of this year. „Estonia’s exports and manufacturing output have declined sharply. Private consumption through retail trade has also declined. To be honest, the picture is not better in any sector of the economy.”

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Nestor added that when inflation comes down, things will start looking better.

„Estonia’s GDP, measured at constant prices, has been falling since the second half of last year. However, when measured at nominal prices, in ordinary euros, this has been partially hidden in the past because everything has been growing so quickly. Including inflation, corporate profits and people’s incomes. That „Money buys far fewer things than it did a year ago,” he said.

The most pessimistic of SEB’s economic forecasts, Nestor said, is economic growth next year of just 1.5 percent.

„If you look at the current state of the Estonian economy, it is very difficult for me to see where we expect strong growth next year. The main reason is manufacturing, Estonia’s exports and Estonia’s main trading partners Sweden and Finland. No. Any improvement in demand is expected next year. After all, „The construction and real estate markets there will be worse than this year,” Nestor added.

The collapse of the Swedish and Finnish markets will also affect Estonia’s main industries and lead to an increase in unemployment, affecting other sectors of the economy.

Nestor expects wage growth to continue next year, albeit at a slower rate than in recent years, still above 6 percent. „Wage growth next year, at least based on our projections, should outpace inflation, meaning that at least as a result people’s purchasing power will improve.”

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