Economic Analysis - Investment Driven Growth Lies Ahead - NOV 2017


BMI View: Leading economic indicators point to continued rapid growth in Estonia following the 4.4% y-o-y Q117 outturn, and we are revising up our full-year 2017 growth forecast to 3.2% from 2.8% previously. Longer-term, given the stable domestic political situation and the open business environment, we believe that growth outperformance relative to the rest of the eurozone is highly likely .

Estonian economic activity is booming, with Q117 real GDP growth hitting a five-year high of 4.4% y-o-y and leading indicators point to continued strong growth in the quarters ahead. The OMX Tallin equity index continues to hit new all-time highs, while economic sentiment has risen to its highest level since 2011. Based on the correlation between the European Commission's Economic Sentiment index and real GDP growth, the strong Q117 growth rate is likely to be sustained in the near term.

This is further supported by the ongoing surge in industrial production, which rose by 12.6% y-o-y in May. The recovery in Estonia's main export partners across Europe is also providing a tailwind to growth, as is the continued low price of oil, given the country's status as a minor net oil importer. With this in mind we have revised up our 2017 real GDP growth forecast to 3.2% from 2.8% previously.

Improving Sentiment Points To Continued Strong Growth
Estonia - Real GDP Growth Vs Economic Sentiment Index
BMI, Statistics Estonia, European Commission

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