Estonia has relied heavily on foreign trade to boost growth, with exports playing the key role in lifting the economy out of the 2008 recession. However, as external demand started to weaken again towards the end of 2011, the country saw a shift towards domestic demand as a new driver of growth. In their article, authors Tõnu Mertsina and Teele Reivik of Swedbank explore the change in composition to Estonia’s growth drivers, highlighting Russia’s increasing importance as an export partner, Estonia’s rising unit labour cost situation and the widening current account deficit. They conclude by noting the improvement in confidence indicators going into 2013.
This article was featured in a recent issue of Current Economics. You can download a sample at www.consensuseconomics.com.