Finnish Senior Economist: Rising consumer confidence will get Estonians spending again

“Consumer confidence in Estonia began to recover strongly at the end of last year, reaching its highest level since the start of the war in Ukraine,” said Joona Widgren, Senior Economist t at OP Bank. “Although the level remains low by historical standards, it clearly signals that improved confidence will increasingly start to influence real private consumption this year. Purchasing power has grown particularly rapidly in Lithuania and Latvia, but we now expect to see similar progress in Estonia.”

Across the Baltic states, private consumption is expected to be the main driver of economic growth this year. In Estonia, the increase in purchasing power is primarily supported by rising incomes, changes in tax policy and a relatively stable labour market. Consumer confidence is also influenced by inflation, which has stabilised in the Baltic states but still remains above the target set by central banks, mainly due to higher prices for services and food. Inflation may also be affected in the near term by the conflict in the Middle East, which could push up energy prices.

“At this point, it is difficult to assess how much the conflict in the Middle East will affect the economy as a whole, but the key risk factor is the price of oil and gas,” Widgren explained. “A temporary increase in oil prices would have only a modest impact on inflation, but since we do not know how long the conflict will last, we need to remain cautious in our forecasts.”

Overall, however, the Estonian economy is moving towards growth, and economic expansion is expected to improve to a moderately strong level this year. While Estonia’s GDP grew by 0.5% in 2025, growth is forecast to reach 3.2% in 2026. At the same time, investment growth is expected to accelerate more strongly next year as the economic environment becomes more favourable for businesses and confidence in the future improves.