In Estonia, the consumer basket price was 24.8% higher YoY. Orders have declined, making harder to pass the higher costs to the final products. Competitiveness is at stake.
Even in uncertain times, Estonia’s FDI inflow as a percentage of the GDP is the 4th-largest in Europe, thanks to the business legislation and government’s efficiency.
In Estonia, inflation over the year has reached 22.8%. Meanwhile, growth in retail sales and industrial output has slowed down.
In Estonia, consumer prices rose 21.9% in June over the year, whereas the share of energy in the consumer basket is higher only in Latvia.
In May, inflation in Estonia touched 20% over the year, with higher energy costs being passed through to the prices of goods and services.
In Q1 employment in Estonia rose by 5.1% YoY, giving hope on the ability to absorb the shock of a fiscal and monetary tightening.
Although growth in employment accelerated, and the restrictions did not deliver any major setback, the labor force participation rate fell.
Following a record GDP growth (8.5%) in 2021, the Estonian economy will slow in 2022, still maintaining a strong pace (+4%).
The example of Estonia suggests that the focus on an efficient allocation of resources works more effectively than a stimulus of demand.
Estonia showed one of the fastest recoveries from the crisis with an economic growth of 8%. However, a slow down is now expected.