SEB gives dire outlook for Estonian economy

  • 2008-10-21
  • TBT Staff in cooperation with BNS

SEB's Estonian branch said the economic outlook for the country was worse than previously thought (Photo Courtesy of SEB)

TALLINN 's SEBPanka, the Estonian branch of the major Swedish bank SEB, has becomesignificantly more critical in its economic outlook and said that the countryis suffering from an economic hard landing.

Ruta Eier, economist at SEB Pank, told a press conference that compared withthe previous forecast additional shocks have been revealed both in the Estonian economy as well as worldwide.

The impact from the world economy will reach Estoniaon the full scale next year, she said.

In its fresh estimate published on Tuesday, SEB expects the Estonian economy to contract by 2.2percent next year, a major revision from the estimate of 1.5 percent growthheld out by the bank in its August forecast. The economy is expected to grow2.0 percent in 2010, according to the new forecast.

An earlier forecast suggested that inflation in Estoniawill drop from 10.5 percent this year to 4 percent in 2009. The new forecastleaves the estimated inflation figure for 2008 unchanged but raises theestimate for 2009 by one percentage point.

Ahti Asmann, CEO of SEB Pank, said that problems of the Estonian real estate sector and theworld's financial sector have not been fully exposed in the economy as a wholeand that there is a big danger of this happening.

A major problem is posed by the risk of growing unemployment, Asmann said.SEB estimates Estonia's jobless rate to be5.0 percent this year, 7.0 percent in 2009 and 6.0 percent in 2010.

It estimates public sector deficit to amount to 1.5 percent of GDP in 2008,to 1.0 percent in 2009 and to 0.5 percent in 2010.