Data reported by Eesti Pank estimate that overall Estonian GDP shrank by 3% in 2023. GDP in the fourth quarter was down by 2.7% over the year, but 2.3% of that came from a fall in value added in the energy sector. The GDP data show that the value added in the energy sector was down by about half. Instability still lies underneath.

On top of the changes in export markets, companies have replaced the inputs and materials they need for their production, but there are too few readily accessible data on that. Reportedly, the recent high inflation makes it harder to compile statistics.

A large proportion of economic indicators still point to general weakness in the economy. There is a clear need for improvement in economic policy and competitiveness. Supporting growth in the economy requires Estonia to build on the competitive advantages of an efficient business environment and the wide experience of digital enterprises. The recession was still quite broadly based in the second half of last year, but ICT was one of the first sectors to return to growth.

On the other hand, the rise in consumer prices over the year slowed to 4.2% in February. The price level was unchanged from January, as lower prices for electricity and gas offset the seasonal rise in the prices of manufactured goods and the consumer basket of services.

Electricity has caused a lot of price volatility in recent months.  A large number of consumers in Estonia still buy their electricity at the price of the universal service though, which is notably higher than the market price at 154 €/MWh. the price of electricity may fall once it is no longer available as a universal service from May, which would have a notable effect on the consumer price index.

Food prices were most directly affected in February by the higher VAT rate that applied from the start of the year and the rise in excise on alcohol. The fall in the price of agricultural commodities has gradually passed through into the price of food in shops. In 2023 as a whole, food wholesalers earned almost the same amount of profit as farmers, food processors, and retailers put together.

The effect of the rise in VAT is only partially evident in the prices of manufactured goods. Inflation for services has picked up in recent months as transport- and medical services have become more expensive. Services were 5.7% more expensive in February than they were a year earlier, though the rise in VAT affected the prices of services less than it did the rest of the consumer basket.

This year Eesti Pank forecasts that the consumer basket to rise in price by an average of 3.4%.