New statistics confirm old economic fears

  • 2008-09-10
2 By Vincent Freeman, TALLINN
Estonia is still in recession despite revised figures, as is Latvia 's despite denials 's and Lithuania's economy is struggling to keep its head above water. That is the bleak picture that emerged from a raft of data recently released by the Baltic countries' respective statistic bureaus.

According to the Latvian Statistics Bureau, gross domestic product increased by 1.6 percent in the first half of 2008 compared to 2007. In the second quarter of 2008, GDP increased by 0.1 percent compared to the same period in 2007. This small growth would mean the nation is not technically in recession.
But according to Alla Vanga, the statistics bureau's deputy head of national accounts, the opposite is true. Vanga told the financial news company Bloomberg that Latvia's economy had shrunk by a seasonally adjusted 0.2 percent in the second quarter from the previous three months, after shrinking a quarterly 0.3 percent in the first quarter. This by all economic measures puts the country in recession.

The reason for the discrepancy in the figures is that method that the statistics bureau uses to measure the GDP is different from the methods other analysts use.
The Ministry of Finance said the economy grew in transport and communications construction. In the manufacturing trade, agriculture and forestry there was a decrease in output.
Some analysts believe that the situation is set to get worse.

"Looking at these trends, I'm quite sure we will see worse numbers in the coming two quarters," Zigurds Vaikulis, a Parex Asset Management economist, told Bloomberg.
"The good thing is that inflation is dropping," he said. Latvian inflation, at 15.7 percent in August, is the fastest in the EU. The overall eurozone inflation rate is 4 percent.

Revised figures in Estonia showed a contraction of 1.1 percent in the second quarter from a year earlier. The Tallinn-based statistics office said Sept 9. that the economy contracted a revised 0.8 percent from the previous quarter, entering a recession after shrinking a quarterly 0.9 percent in the first three months.
Estonia, in its third recession since regaining independence in 1991, will return to growth "in the middle" of next year, the Finance Ministry forecast said.

"The decline in growth is very wide-based,'' Ruta Eier, a SEB AB economist in Tallinn, told Bloomberg. "Those sectors that are not in decline are mainly supported by public-sector spending. When it declines as well, almost all of the economy will be contracting," Eier said.
Inflation figures are not looking good, either. According to Statistics Estonia, the percentage rise in the consumer price index in August 2008 compared to August 2007 was 11.0 percent.
All through 2008 the rise in the consumer price index compared to the respective month of the previous year has stayed around 11 percent.

In August 2008 compared to August of the previous year, the prices of goods changed by 11 percent. Food prices rose 17.1 percent and the prices of manufactured goods increased 6.2 percent. The prices of services increased 11.2 percent. Regulated prices of goods and services changed by 23.5 percent and non-regulated prices by 7.6 percent.

The index was mainly influenced by the price increases of food, motor fuel and transport services, housing expenditures, and alcoholic beverages and tobacco. Annual price increase of food and transport accounted for half the rise, housing for a sixth, and alcohol and tobacco 's the excise duties on which had increased 's for nearly an eighth.

On average, the prices of goods and services in August were 0.1 percent higher than in July. The consumer price index was mainly influenced by the decrease in the prices of motor fuel, by the seasonal price decrease of vegetables, by the increase in the prices of tobacco products proceeding from the change in the rates of excise duties, and the end of special sales of clothing and footwear.

In Lithuania, estimated GDP figures for the second quarter 2008 showed the economy grew by 5.3 percent, slightly less than the previous estimate of 5.5 percent. The major impact on the revised estimate came from new statistical data on construction, transport, trade, real estate and other sectors.

In the second quarter of 2008, the most rapid growth was observed for the value-added of industrial and energy (6.3 percent) and construction (5.9 percent) sectors, as well as trade, transport and communication (5.8 percent) and financial intermediation and other business services (5.6 per cent). The value-added of non-market services was increasing at a slower pace, rising 3.4 percent. The slowest growth was observed for the value-added of agriculture and fishing (0.9 percent).