V-shaped recovery not likely

  • 2010-08-26
  • From wire reports

TALLINN - Analyst at Swedbank Estonia Maris Lauri stated that while the data showing economic growth indicates that the crisis is over, it is difficult to further increase exports, and not all problems have been put behind us, reports National Broadcasting. She stated in an interview with National Broadcasting that the fact is that Estonia’s economy has started growing for the first time after seven quarters of decline.

“Naturally the situation in the economy cannot be compared with the pre-crisis situation - it would be naive to hope that after such a long and deep decline, the recovery could be made in a couple of quarters,” she noted, explaining that recovery to pre-crisis levels with the same speed as the decline occurred beforehand would be a remarkable achievement that would require more favorable circumstances, both internally and externally.

"Exports were the sector that brought Estonia out of the economic decline. Unfortunately, however, the future in this respect is not quite as rosy as many of us would like to see. Although Germany and other European countries, including Estonia, demonstrated better results than had been expected, there is not much optimism towards the future,” said Lauri. She added that the bigger countries that significantly affect the global economy and the Estonian economy as well have so many different problems that need to be solved that it will take some time. “Until then, economic growth will remain modest and it will be difficult to enhance exports,” she pointed out.

Lauri asserted that Estonia’s chances lie in improving its position on external markets - thus far enterprises have done so due to reforms carried out in production operations. It is to be hoped that businesses will not abandon dealing with productivity and competitiveness improvements.

According to the analyst, the situation on the Estonian domestic market is rather difficult, particularly in terms of consumption. Price growth has increasingly decelerated growth in consumption since spring. “Unless the price growth will stabilize in the near future and will cease to gain momentum, it will appear that next year the positive potential impact of consumption on economic growth will be much smaller than expected,” stated Lauri.

“Although the second-quarter economic growth was stronger than expected, several factors in Estonia, and external ones as well, indicate that the future quarters might not bring quite such good results. Estonia’s economic growth will continue and although there are options for boosting growth, the strength of the factors decelerating it seems at the moment to be stronger still,” she concluded.