Exports continue recovery support

TALLINN - The economic outlook presented by the Estonian Institute of Economic Research predicts that Estonia’s GDP will be back to pre-crisis levels in 2013, reports National Broadcasting. While in 2008, Estonia’s GDP totaled 251 billion kroons (16 billion euros), the institute predicts that this year GDP will be 219 billion kroons with economic growth of 1.1 percent.
In 2011, GDP is predicted to reach 231 billion kroons, with growth of 3.6 percent; in 2012 GDP will reach 247 billion kroons, growing by 3.9 percent and in 2013 GDP of 266 billion kroons at a growth rate of 4.1 percent.

The Institute estimates that 2010’s inflation rate will be 1.8 percent, next year 2.4 percent, in 2012 2.7 percent and in 2013 3 percent. Some analysts estimate that the consumer price index indicators will be even higher, rising to 4 percent in 2011 and 2013. This might not fit within the Maastricht inflation rate criterion.

According to the outlook, the export of goods will develop successfully in the mid- to long-term perspective, growing by an average of 9 percent per year. In 2013, export volumes should exceed the pre-crisis level at 11 billion kroons. Imports of goods will grow from year to year from 2010-2013, exceeding export volumes each year. Nevertheless, imports in 2013 are expected to remain lower than during the boom years.

The projected average annual unemployment rate will this year exceed the level of 2009 by 20,000, but will start falling afterwards by approximately 10,000 and will fall to 56,000 by 2013. According to the most optimistic outlook, unemployment in 2013 will be at 30,000 persons.

The average pay is expected to fall this year by 2 percent in comparison to last year, but to start growing then from year to year, reaching 13,420 kroons per month in 2013. The highest pre-crisis pay level was 13,912 kroons, in 2008.
The Institute emphasized in its outlook that the developments in the Estonian economy in the coming years will largely depend on the success of Estonia’s principal trade partners and on the interest foreign investors display in Estonia. Both factors, however, entail risks and make it difficult to predict the developments in the longer term perspective with any degree of certainty.

June numbers, say the analysts at the Institute, show that the overall situation in the Estonian economy was better than during the first quarter of the year. During the past few months, the unemployment rate has started falling and due to the active approach of the export sector, industrial production output has been growing significantly.
Economic developments have also been boosted by the overall improvement of confidence towards the state’s economic policy, largely due to the impending accession to the euro area and to OECD.

Although most analysts - 56 percent - polled by the Institute still consider the situation in the economy to be bad, there have been significant developments in comparison to June of last year. For example, most businesses have by now adjusted to the crisis situation and have found new options for more actively pursuing business. Fifty-nine percent of analysts find that the current situation is better than that of a year ago, and only 12 percent find that it is worse.

“We can be happy about the fact that recovery in Estonia is among the fastest in the European Union,” said the director of the Institute, Marje Josing. She estimated that the crisis in Estonia was deep, but the country’s flexibility will make it possible to overcome the crisis successfully.