OREANDA-NEWS. May 17, 2012. Estonia’s GDP increased 3.9%, year-on-year, in the first quarter of 2012. Compared to the post-recession rapid expansion period, the annual growth rate has slowed as expected. Seasonally adjusted GDP was 0.5% larger than in the fourth quarter of 2011. Growth was mainly supported by domestic demand, which continued recovering from the slump of a couple of years ago. The industrial sector has also started to recover from the steep decline in autumn, reported the press-centre of Eesti Pank.

Households’ increasing income and stronger confidence in maintaining it stepped up consumption at the beginning of the year. Retail sales gathered momentum in January, referring not only to the exceptionally low reference base at the start of 2011, but also to rapid consumption growth compared to previous months. Capital goods and industrial equipment imports also picked up at the start of the year, signalling growth in investment.

Although industrial production was relatively modest in March compared to earlier, the situation in industry has improved somewhat after the fall in early autumn. The production volume of computers, electronic and optical devices, which dropped heavily in September, has notably increased again. Compared to the last quarter of 2011, energy production increased in the first quarter of 2012, since the warmer-than-usual autumn was followed by a cold winter. On the other hand, electric energy imports increased and exports declined in March, because of the cheapening of electricity in Nordic countries owing to the high share of hydro power.

Economic activity continues to be sluggish in Europe, and this affects Estonia's companies and consumers as well. For instance, the seasonally adjusted volume indices of industrial production and retail sales, which both increased in January and February, dipped in March. Although Estonia’s economic situation was favourable in the first quarter of 2012, the uncertainty deriving from the European sovereign debt crisis may nevertheless result in some problems in the near term.