TALLINN - Just as it seemed that Estonia's economy could not get much worse, the national statistics agency has confirmed a collapse of both industrial output and retail sales.
The data produced by Statistics Estonia in the first week of July highlighted that key areas of the economy were still in decline.
The contraction in the economy of over 15 percent in the first quarter is predicted to continue when results are confirmed on Aug. 12.
"The pace of the contraction shows no signs of slowing down," said John Andrew, an analyst with the Economist Intelligence Unit in London. "If anything, the risk is that it will accelerate as unemployment rises and as wages continue to fall."
He forecast an economic contraction of 17 percent for the second quarter, Bloomberg reported.
Industrial output was down 30 percent year-on-year in May and this continued a negative trend. In December 2008 the fall in production was 22 percent, in January 2009 26 percent and since February the production decreased consistently by about 30 percent compared to the respective month of the previous year.
Retail sales fell by 16 percent to 4.8 billion kroons (307 million euros) in May year-on-year. Compared to May 2008, the retail sales of goods decreased in most economic activities except the retail sale of second-hand goods.
Inflation also fell year-on-year by 0.9 percent 's this represented the lowest level of inflation since Estonia regained independence in 1991.
Compared to June of the previous year, the consumer price index was mainly influenced positively by alcoholic beverages and tobacco. The joint price increase was 17 percent, but this was compensated by decreasing price sectors.
Food costs fell 6.3 percent and motor fuel fell 20.8 percent 's the biggest factors resulting in the fall in inflation. Of the food, milk and dairy products fell 15.6 percent, providing for nearly half of the impact.
However, there were some cautious comments that indicated the economic situation might be stabilizing in the near future.
The new Estonian Finance Minister Jurgen Ligi in an interview with Bloomberg said, "Estonia's economy is nearing a bottom, and third quarter gross domestic product should contract less than in the previous two quarters. I see the bottom is near in terms of stabilization, but recovery is another story."
Ligi said he was "cautious about predicting an improvement in the current quarter after a record annual contraction of 15.1 percent in the first three months."
Governor of the Bank of Estonia Andres Lipstok, speaking to Err, said "Estonia's economy and financial system have been able to adjust well to the global recession, which gives the country an opportunity to come out of the crisis successfully."
"Events in the end of last and beginning of this year were a touchstone for Estonia's economy and monetary and financial system, which tested Estonia's resistance and ability to adjust to a changing external environment," Lipstok said.
"Today I dare to assess the situation with modest optimism and repeat what I said in March: Estonia has all the opportunities to get through the crisis and overcome it successfully," he said
The consumer confidence indicator of the Estonian Institute of Economic Research has somewhat improved during the last months, but it has not brought with it increased consumer expenditure. Consumers remain hesitant and restrict their daily expenditure, Statistics Estonia reported.