Gross domestic product (GDP) fell by 0.7% YoY in the first quarter of 2020, figures released by state agency Statistics Estonia showed. GDP at current prices stood at EUR 6.5 billion.
Value added grew by 2%, Statistics Estonia reported, driven primarily by information and communication and construction.
Economic growth was hindered mainly by the energy sector, largely due to warm winter and reduced heating costs. Of larger economic activities, manufacturing, which began to decline already in the second half of 2019, harmed economic growth.
Robert Muursepp, the leading analyst at Statistics Estonia, said the impact of the coronavirus was not yet considered.
“However, the virus seems to have negatively affected trade, transport, and accommodation and food service activities,” he added.
The main reason for the economic downturn are net product taxes, which fell in the first quarter by 18.8%, mainly due to a drop in VAT and fuel excise duty receipts.
Household consumption growth also decelerated markedly to only 0.3%, which was the most modest growth since the last major crisis.
“Investments declined by 6.9%, not due to the coronavirus, but rather because manufacturing has shown a long-term downward trend and the investment level in the first quarter of 2019 was very high,” explained Muursepp.
Investments by enterprises into transport equipment and machinery and other equipment dropped the most. At the same time, the investments of the government sector into buildings and structures and households’ investments into dwellings increased.
In the first quarter, exports dropped by 2.6% and imports by 5.2%. Similarly to manufacturing, foreign trade slowed down already last year. The exports and imports of goods declined at the end of last year and were now followed by foreign trade in services. The main contributors to the decline were electronic equipment and travel services.
Compared to the fourth quarter of 2019, the seasonally adjusted GDP fell by 3.7% and compared to the first quarter of 2019 by 0.8%. (ERR/Business World Magazine)