One-time gains boost output

  • 2010-02-18

TALLINN - Estonia’s gross domestic product dropped 9.4 percent in the fourth quarter of 2009, year-on-year, compared with a 15.6 percent drop registered in the third quarter, reports Bloomberg. This fourth quarter improvement was due to a slowing in the decline of exports. The Finance Ministry was looking for a contraction of between 11 percent and 12 percent.
The economy grew a seasonally adjusted 2.6 percent from the third quarter. “Consumer demand was weak, as expected, and the improvement has come due to export markets,” said Maris Lauri, chief macro analyst with Swedbank in Tallinn. “Investments should slowly recover, while consumption will remain weak in the first half.”

The Finance Ministry said that fourth quarter data were affected by one-time stock-building activity. Companies built up their inventories in the final months of the year in anticipation of a January tax increase on tobacco, alcohol and motor fuels, the ministry said. Economic growth will see a “negative effect” in the current quarter as inventories will be run down, it noted.
The value added by the industrial sector contracted at an annual 17 percent pace, compared with a 28 percent shrinkage in the third quarter, largely due to a recovery in external demand. Contraction in the wholesale and retail trade, the third-biggest contributor to GDP, deepened in the fourth quarter.

Estonia’s exports, led by wireless network gear and generators for wind turbines manufactured by local units of Ericsson and ABB, were 0.8 percent lower in December from a year earlier, the smallest decline since October 2008.
Consumer demand has been hurt by the government’s efforts to cut the budget deficit on its drive to meet the euro adoption terms. Estonia’s largest retailer, Tallinna Kaubamaja, said on Jan. 11 its sales declined 10 percent in the fourth quarter from a year earlier, led by falling revenue at its department stores and auto unit. In January, a report from Swedbank said that the country’s GDP may increase 1.5 percent this year if it receives a positive decision from the European Commission on euro adoption later this year.