Recession?!

Technically, Estonia seems to be in a recession, as our GDP growth has been negative for two quarters in a row. There are some important factors that do not make this a regular recession:

1. Unemployment rates are 4% (which is 0,2% below last quarter and 1% less than last year’s same quarter). So people still have jobs and the incomes of people actually should be growing at a normal rate. People seemed to have been scared off by the media’s talk about a possible recession and the rising prices and simply stopped spending as much as they used to.

2. The real estate market has not collapsed. In July actually the number of transactions rose slightly, which might (or might not) be an early indication of a recovery in that sector and the economy as a whole.

3. The statistics are always behind the times. As we live in August, we get the picture of the state of the economy in the quarter ending 30 June. It is important to see what are the numbers for this quarter, if it is going to be more than this quarter’s growth, the worse will be over.

4. The external factors are looking better as well. Oil prices are falling, euro is weakening slightly (helping exports).

So the thought should be do not panic, there is light at the end of the tunnel.