Page 20 - CE Outlook Regions 2023

2.2.1 GDP growth
The EBRD expects 1.5% GDP growth in 2022 and 1.0% growth in
Estonia in 2023. The Estonian finance ministry forecasts growth to be
1% in 2022 and 0.5% in 2023.

With the strong recovery in private consumption following the end of the
restrictions imposed to stem the COVID-19 pandemic, and the only
limited effects of the war, the Baltic states’ economic growth was
increasing in the first half of 2022, but in the second half the high prices
and the drop in purchasing power caused a significant decrease in the
consumption growth rate, as well as worsening the situation of local
producers and maintaining low investment volumes.

High energy prices, rising production costs, and weakening demand in
external markets will continue to have a negative impact on the Baltic
economies in the first half of 2023. However, economic growth is
expected to recover from the middle of the year as part of the general
recovery of the EU and the world economy.

The impact of the crises like the COVID pandemic, as well as the direct
impact of high-inflation, has been softened by people using their
savings and by support from the state.

Even in the face of very high inflation, households have been able to
use their savings to continue consuming, and private consumption in
real terms fell less than one percent in each Baltic state. Using savings
now means though that it will not be possible to use them in the future
to cushion any more shocks that might happen.

As household buffers have shrunk, so has their ability to soften any
negative impact on the economy, and if new risks are realised, they will
affect economic developments much more.

At end-November 2022, registered unemployment rate in the Baltics
was uneven. In Latvia, it was 5.9%, in Lithuania in November – 8.3%, in
Estonia – at 5.6% in the third quarter of 2022.

The unemployment rate will most likely grow pan-Baltic in 2023 – due to
the war spillovers and the anticipation of a recession.

20 CE Outlook 2023 www.intellinews.com