Bank of Estonia sanguine despite downturn

TALLINN - Eesti Pank issued a press statement August 14th which maintained a sanguine view of the coutry's economic prospects. Even though Estonia has technically entered a recession, Andres Saarniit, Adviser to the Economics Department of Eesti Pank did not seem unduly concerned.

"The volume of the Estonian economy was 1.4% smaller year-on-year in the second quarter of 2008. Compared with spring, the global economic growth outlook has worsened with growth indicators being volatile. In this context, it is logical that there occurred no pivotal changes in economic growth in the second quarter in Estonia. Only a sharp improvement in export opportunities would have been able to make up for the expected weakening of domestic demand against the backdrop of last year's rapid growth," Saarniit said.

He added that the economic downturn was caused by the continued decline in domestic demand, while the global economic outlook will not be conducive to a noticeable pick-up in Estonia's exports any time soon.

"Looking at the spring forecast of Eesti Pank it can be said the economy is following the scenario which expected a fast decline in domestic demand at the beginning of 2008 and a re-acceleration of growth during 2009," Saarniit concluded.