Page 27 - CE Outlook Regions 2022

2.2.1 GDP growth

The Estonian economy saw robust expansion in the first three quarters
of 2021, with GDP growth at 8.6%. In 2022, the growth rate is expected
to slow down to 4% and thereafter continue at slightly below 3%.

The Estonian economy has adjusted to local and foreign restrictions
because of the COVID-19 pandemic and even if the restrictions should
be reinforced, no considerable negative impact would be expected from
that on the economy.

Investments in 2022 will be supported by higher investment activity of
the public sector and the savings of residents. Pension savings of
residents from the second pillar are driving housing investments. New
construction projects in the pipeline will result in growing public
investments in the coming years.

Private consumption growth in 2022 will be influenced (in addition to
fast labour income growth) by high inflation (3.7%) and the use of
second pillar pension funds, which were released in September 2021. If
government-imposed restrictions will be further released and
uncertainty about future developments decreases, some of the
enforced savings that have accumulated on deposit accounts can also
be spent. This would be a positive risk and is not part of the base
scenario.

Unemployment stood at 5.7% in the country in October 2021, 6.9% for
women and 4.4% for men. The situation in the labour market will remain
controversial throughout 2022 – companies will continue seeing labour
shortages, while unemployment will still be significantly above pre-crisis
levels.

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