According to Statistics Estonia, the country’s gross domestic product fell by 2.7% in the fourth quarter of 2023 compared with the same period in 2022; for 2023 as a whole, Estonia’s GDP fell by 3%.
The GDP at current prices was €9.9 billion in the fourth quarter. For the whole of 2023, the country’s GDP amounted to €37.7 billion at current prices.
Robert Müürsepp, head of the national accounts team at Statistics Estonia, the country’s official statistics agency, said there was a broad-based recession in Estonia throughout last year.
“There were positive contributions from only a few economic activities, and the main sectors were mostly in decline. The economy was boosted most by trade and real estate activities, while information and communication had the biggest negative impact. However, the latter’s contribution also turned positive in the second half of the year,” Müürsepp said in a statement.
In the fourth quarter, the largest positive contributors were agriculture, hunting and fishing and trade. The energy sector, manufacturing, professional, scientific and technical activities and transport and storage continued to decline. Construction also made a negative contribution, continuing the trend of the last year and a half.
Worst economic downturn since 2008
Müürsepp noted that Estonia had not experienced such a broad-based economic downturn since the bursting of the real estate bubble [in 2008].
“Even in the year of the coronavirus pandemic, there were more positive contributions to GDP than in 2023. It should be noted, however, that both GDP and value added continued to grow last year at current prices. The weak performance in real terms in the last two years was caused by the rapid rise in prices, which affected all economic activities,” Müürsepp added.
Inflation slowed towards the end of the year.
Private consumption picked up in Q4
The biggest change was in tax revenue. Net taxes on production fell sharply in the first three quarters, but then rose by as much as 6.3% in the fourth quarter. As a result, the annual decline was only 1.9%.
In the fourth quarter there was also an upturn in private consumption, as the decline of the previous quarters was replaced by an increase of 0.5%. In 2023 as a whole, private consumption fell by 1.5%. Over the past year, the biggest falls were in household spending on goods and services, equipment and recreation.
Government consumption fell in the third quarter, but recovered quickly and grew by 2% in the fourth quarter. The total increase in government consumption in 2023 was 0.9%.
A difficult situation in foreign trade
The year 2023 was a volatile year for investments but, in the fourth quarter, investments remained almost the same as in the corresponding quarter of 2022 (down by 0.4%). There was a positive impact from government investments in machinery and equipment and weapons systems (+47.6%) and in buildings and structures (+15.5%).
In 2023 as a whole, investments fell by 3.4%. The largest boost came from investments in dwellings, which rose by 14.1%. The largest negative contribution came from investments in transport equipment, which fell by 41.1%.
Foreign trade remained difficult in the fourth quarter, with exports of goods and services falling by 9% and imports by 6.6%. For goods, the decline was 13.5% for exports and 10.1% for imports. The main sectors affected were electricity, wood and chemical products.
Trade in services fared slightly better, with exports falling by only 0.7% and imports rising by 2.9%. Here, the performance was mainly affected by the decline in the transport sector, which was mainly due to rail transport services. At the end of 2002, foreign trade accounted for 86% of GDP. By the end of 2023, this share had fallen to 78%.
