Estonia's economy picks up: are wallets finally getting a little lighter?

Luminor Bank's chief economist Lenno Uusküla says many Estonians have more money in hand since the start of the year, though not equally distributed. Food prices remain stubbornly high, pushing shoppers to hunt discounts and scrutinise price tags more carefully than ever.

Estonia's economy has shown signs of recovery in early 2025, with Luminor Bank chief economist Lenno Uusküla noting that many households have genuinely seen their financial situation improve since the start of the year. The improvement is real, but uneven — enough for most people to cover their bills and feel slightly more relaxed at the checkout, yet far from a broad-based boom.

More cash, but not for everyone

Uusküla is careful to temper the optimism. The uptick in purchasing power has not reached all corners of Estonian society equally, and for many lower-income households the relief remains marginal at best. Wage growth and easing inflation in some sectors have combined to give consumers a modest boost, but the gains are unevenly distributed across income groups and regions.

Food prices still a daily struggle

Despite the broader economic upturn, food prices in Estonia remain at historically elevated levels. Consumers have responded by becoming increasingly strategic shoppers: hunting for discounts, switching from domestic branded products to cheaper alternatives, and scrutinising price tags with a level of attention not seen in previous years. Retailers have noticed a clear shift in purchasing behaviour, with private-label and budget product lines gaining market share.

The mixed picture reflects a wider European trend, where headline inflation has come down but the cumulative price increases of recent years have left a lasting dent in household budgets. For Estonia, where food spending makes up a significant share of lower-income household budgets, the squeeze is felt acutely. Economists caution that a return to pre-crisis shopping habits is likely still some way off, even as the broader economic indicators continue to improve.