TALLINN- Second-quarter economicgrowth in Estonia sank toan annual rate of 7.3 percentas the Baltics' wealthiest countrybegins to decelerate and avoid theprevalent risk of overheating.The Statistics Office announcedthat the lower result was due toslower growth in value-added goodsand services in manufacturing,wholesale, transport and storage.The office explained that theresult is a flash estimate 's based ondata received from administrativedatabases and monthly statisticalsurveys. Preliminary GDP data calculatedin accordance with internationalmethodology would bepublished Sept. 10, the office said.Still, analysts hailed the news,though admitting the slowdownwas more dramatic than expected.
Anne Karik-Uustalu, an analystwith Sampo Pank, pointed outthat the reduction of rail transportationvolumes 's whichoccurred as a result of Russia'sunwillingness to continue tradewith Estonia after the removal ofthe Soviet war memorial at the endof April 's also played a role in thesecond-quarter retreat."We expect the economy to keepgrowing at a rate of 7-8 percent inthe second half of the year," shesaid. "A further increase dependsgreatly on growth in efficiency,which helps alleviate the shortageof labor. There are already indicationsthat the number of job cuts isrising simultaneously with the creationof new jobs, so the bottlenecksare easing a bit."Estonia's economy grew 9.8percent in the first quarter of theyear.
Annual inflation was 6.4 percentas of July.Karik-Uustalu explained thateven though inflationary pressureshave yet to abate due to hikes inadministrative prices and increasesin the price of Russia's naturalgas, core inflation could slow downtoward the end of the year."In sum, we can say that asmooth slowdown of growth is continuingin the Estonian economyand risks of overheating are receding,"she said.The Bank of Estonia said thedata corresponds to a soft-landingscenario, the more desirable outlookfor the country, which riskedoverheating after the economygrew 11.4 percent in 2006.
The reasons for the slowdowncan be found in both internaldemand and export, said AndresSaarniit, a bank adviser. Judging byexisting data, the rate of growth inthe export of goods has maintainedits prior level, although a part ofthis may be attributable to thegoods' higher prices, he said.Meanwhile, Prime MinisterAndrus Ansip told Reuters in aninterview that the budget surplusso far this year was 1.9 percent andthat it was possible to attain lastyear's level of 3.8 percent. Heexpressed optimism that the economywould cool down slowly, withouta hard landing, and that inflationarypressures would also ease."The inflationary rate will beon a quite high level during thenext nine months, because we willincrease some excises from thefirst of January next year, and thenwe will not increase the excises inthe coming three years, because wewould like to reach the Maastrichtcriterion," he added.
