TALLINN
- Second-quarter economic
growth in Estonia sank to
an annual rate of 7.3 percent
as the Baltics' wealthiest country
begins to decelerate and avoid the
prevalent risk of overheating.
The Statistics Office announced
that the lower result was due to
slower growth in value-added goods
and services in manufacturing,
wholesale, transport and storage.
The office explained that the
result is a flash estimate 's based on
data received from administrative
databases and monthly statistical
surveys. Preliminary GDP data calculated
in accordance with international
methodology would be
published Sept. 10, the office said.
Still, analysts hailed the news,
though admitting the slowdown
was more dramatic than expected.
Anne Karik-Uustalu, an analyst
with Sampo Pank, pointed out
that the reduction of rail transportation
volumes 's which
occurred as a result of Russia's
unwillingness to continue trade
with Estonia after the removal of
the Soviet war memorial at the end
of April 's also played a role in the
second-quarter retreat.
"We expect the economy to keep
growing at a rate of 7-8 percent in
the second half of the year," she
said. "A further increase depends
greatly on growth in efficiency,
which helps alleviate the shortage
of labor. There are already indications
that the number of job cuts is
rising simultaneously with the creation
of new jobs, so the bottlenecks
are easing a bit."
Estonia's economy grew 9.8
percent in the first quarter of the
year.
Annual inflation was 6.4 percent
as of July.
Karik-Uustalu explained that
even though inflationary pressures
have yet to abate due to hikes in
administrative prices and increases
in the price of Russia's natural
gas, core inflation could slow down
toward the end of the year.
"In sum, we can say that a
smooth slowdown of growth is continuing
in the Estonian economy
and risks of overheating are receding,"
she said.
The Bank of Estonia said the
data corresponds to a soft-landing
scenario, the more desirable outlook
for the country, which risked
overheating after the economy
grew 11.4 percent in 2006.
The reasons for the slowdown
can be found in both internal
demand and export, said Andres
Saarniit, a bank adviser. Judging by
existing data, the rate of growth in
the export of goods has maintained
its prior level, although a part of
this may be attributable to the
goods' higher prices, he said.
Meanwhile, Prime Minister
Andrus Ansip told Reuters in an
interview that the budget surplus
so far this year was 1.9 percent and
that it was possible to attain last
year's level of 3.8 percent. He
expressed optimism that the economy
would cool down slowly, without
a hard landing, and that inflationary
pressures would also ease.
"The inflationary rate will be
on a quite high level during the
next nine months, because we will
increase some excises from the
first of January next year, and then
we will not increase the excises in
the coming three years, because we
would like to reach the Maastricht
criterion," he added.
