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Estonia Economy Shrinks Further

Estonia's economy contracted for a fourth straight quarter in the final three months of 2020, a year in which economic activity was severely hurt by the coronavirus pandemic.

Gross domestic product dropped an unadjusted 1.2 percent year-on-year after a 2.5 percent slump in the third quarter, preliminary data from Statistics Estonia showed Monday.

The economy has been shrinking since the first quarter of 2020 as the coronavirus started spreading across the world. In the fourth quarter of 2019, the economy had expanded 5.3 percent.

Household consumption decreased by 1.3 percent in the fourth quarter. While expenditure on furnishings, food and communication continued to increase, spending on transport, clothing and leisure decreased.

On a seasonally and working-day adjusted basis, GDP decreased 1.9 percent year-on-year after a 3.5 percent fall in the third quarter.

Despite the travel restrictions due to the pandemic, exports fared well with sharp increase in demand for electronic equipment and chemical products. Imports were led by those of machinery and equipment.

Investments into the financial sector and into transport equipment fell. Receipts of both value-added tax and excise duties decreased, due to base effect.

Compared to the previous three months, GDP grew an unadjusted 7.3 percent in the fourth quarter after a 7.1 percent increase in the third quarter.

Seasonally and working-day adjusted GDP rose 2.1 percent sequentially following a 2.5 percent growth in the previous quarter.

The economy grew sequentially for a second straight quarter.

"The contribution of manufacturing was negative, but the situation in that economic activity improved to reach pre-pandemic levels," Robert Muursepp, an analyst at Statistics Estonia, said.

The rapid decline in transportation and storage also slowed down, the economist noted. That said, there were other signs of the economy recovering at the end of the year, Muursepp said, pointing to the positive contribution from the information and communication and the financial sector.

In the full year 2020, the Estonian economy shrank 2.9 percent due to the restrictions imposed in response to the coronavirus, after a 5.0 percent expansion in 2019.

This was the first annual decline in output since a 14.4 percent slump since the global financial crisis of 2009.

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