TALLINN - Estonia's economy is showing signs of increasing precariousness as growth continues to slide and inflation climbs to new highs.
The statistics office announced on March 10 that fourth quarter GDP growth amounted to 4.8 percent, which is lower than the previous preliminary estimate but still points to a possible hard-landing scenario for the economy.
For the entire year 2007 the economy expanded 7.1 percent, down from 11.2 percent growth registered in 2006.
Quarter-by-quarter, Estonia's economy slowed significantly, sliding from 9.8 percent in the first three months, to 7.3 in the April to June period, and then 6.4 percent in the third quarter.
The 4.8 figure for October to December represents the lowest quarterly growth in the Baltic states over the past two years.
Consumer prices, in the meantime, are inexorably moving upward. In February the index rose at an annual rate of 11.3 percent, the statistics office announced on March 7.
Food prices led the charge, surging 15.1 percent, while services were up 13 percent over the 12-month period.
Though high, the 11.3 percent annual rate was only slightly higher than the 11 percent recorded in January, which seems to indicate that inflation in Estonia might slow at a faster rate than either Latvia or Lithuania. February inflation amounted to only 0.4 percent.
The Bank of Estonia has said consumer prices would fall in the second half of the year, while the Finance Ministry has opined that peak inflation has already been attained now that domestic demand has subsided.
Maris Lauri, an economist with Hansabank Markets, told the Baltic News Service that domestic demand remains would continue and exports were key to boosting growth this year.
"According to our forecast the Estonian economy will grow at a rate of about 4.5-5.5 percent this year, with a lot depending on how one will succeed in boosting exports," Lauri said.
Sander Klaos, an analyst at Nordea Pank, said the bank expected Estonia's GDP growth to come in at 4 percent this year. "As the source of growth, we see export growth, in which we forecast a strengthening to a certain degree in comparison with 2007," Klaos said.
