The Central Bank of Estonia said Estonia's gross domestic product grew by 2.4% year on year in the first quarter and by 1.1% from the fourth quarter of 2025, with growth driven mainly by domestic consumption. Household spending was supported by changes to personal income tax that raised disposable income, while government spending also increased, probably through defence expenditure. The bank added that lower underlying inflation and a more stable economic environment also supported consumption. The update said the budget deficit is supporting growth in the short term but will raise the debt burden over time, and Governor Madis Müller proposed that political parties agree to reduce the deficit to restrain growth in national debt. Export growth was relatively modest and investment fell, although the bank said first quarter investment is seasonal and individual transactions can materially affect the data. Manufacturing made a notable contribution to growth, and quarterly enterprise statistics showed a second consecutive quarter of strong corporate growth, led by retail, information technology, logistics and business services, even as value added from information and communications fell at constant prices. The bank also noted that higher energy prices and supply chain disruption linked to the war in Iran had not yet had a substantial effect in the first quarter and should become more evident in the second quarter. The Central Bank of Estonia will publish an updated forecast on 16 June.
Central Bank of Estonia2026-05-29
Central Bank of Estonia reports first quarter GDP growth of 2.4 percent driven by domestic consumption
The Central Bank of Estonia reported that GDP grew 2.4% year on year in the first quarter, driven mainly by domestic consumption supported by higher household disposable income and increased government spending. It warned that the budget deficit is supporting growth only in the short term and urged political parties to agree on deficit reduction, while noting modest export growth, weaker investment and sectoral divergence, with manufacturing and several services sectors performing strongly. The bank added that the impact of higher energy prices and supply chain disruption from the war in Iran is likely to become more evident in the second quarter.