EstoniaEstonia Quarterly Review

Change of the government. The government led by Jüri Ratas resigned on 13 January 2021. President GDP growth in 2020Q3, % y.o.y. Kersti Kaljulaid appointed the new government led Spain by , head of the Reform Party, to office on EA19 26 January 2021. EU27 Germany The Estonian economy has recovered relatively well from first phase of the pandemic, but the Denmark second wave is hindering recovery of the service sector. The decline in output was one of the lowest -3,2 in the Eurozone in Q3 2020 (yoy -3.2%). Export of Sweden goods has recovered, while export of services is still Poland Lithuania in decline. -15 -10 -5 0

Registered unemployment has increased by 3 percentage points since March 2020 and reached 8.7% in January 2021. Unemployment stabilised Registered unemployment rate, % somewhat after the restrictions of the 1 st wave of pandemic were lifted, but started to rise again 10% nd 9% during the 2 wave. Nevertheless, unemployment 8,7% rate remains below summer forecast expectations 8% of 10% for Q4 2020 – Q1 2021. 7% 6% The current account surplus increased to a historic 5% high of 5% of GDP in H1 2020 due to the pandemic 4% as private sector investments were postponed, and 3% consumption fell. In Q3 of 2020, large-scale 2% acquisition of intangible fixed assets in the ICT sector led the current account into a deficit of 2% of 01.01 01.02 01.03 01.04 01.05 01.06 01.07 01.08 01.09 01.10 01.11 01.12 GDP. 2018 2019 2020 2021

FDI net inflow into Estonian economy reached 8.2% of GDP for the first 9 months of 2020 (increased 97% yoy). The majority part of FDI inflow has been Nominal budgetary position, % of GDP concentrated into ICT and financial sectors. 1% 0% -0,1% The general government budget deficit reached -1% 4.3% of GDP in the year to November and the -2% outturn for 2020 is expected to be better than the -3% summer forecast of 6.6% of GDP. Tax revenue -4% -4,3% collected was 1.6% higher yoy in November 2020. -5% The forecast of the general government nominal budget deficit for 2021 is 6.7% of GDP. -6% -7% -6,6% Jul Jan Jun Oct

Estonia’s credit ratings: S&P (AA-), Moody’s (A1), Apr Sep Feb Dec Aug Nov Mar Fitch (AA-), all stable. May 2019 2020 Projection As of 31 December 2020, the debt portfolio of the MoF of Estonia was EUR 3.2 billion (12% of GDP) with weighted average term to maturity 7 years. Estonia’s projected financing need for 2021 is EUR 2.4 billion (8.4% of GDP), which will be covered through various debt instruments, likely to include a Eurobond issue later in the year.

State Treasury January, 2021 Ministry of Finance of Estonia [email protected]