Estonia leads EU economic growth

  • 2011-09-07
  • From wire reports

TALLINN - Estonia will raise its 2011 forecast for economic output to about 7 percent from the current outlook for 4 percent growth, Prime Minister Andrus Ansip said, reports Bloomberg. “As this year’s growth is stronger than expected,” the Finance Ministry “will take that faster growth off of next year’s forecast,” Ansip said at a news conference in Tallinn on Sept. 1.
“Broadly speaking, the total volume of gross domestic product will remain almost unchanged next year.”
Next year’s growth outlook will be revised lower from the April forecast of 4 percent, he said, confirming Finance Minister Juergen Ligi’s comments on Aug. 25.

The 13.4 billion euro economy, the third in Eastern Europe to adopt the euro, which it did this January, is growing at the fastest pace in the European Union this year. Second-quarter gross domestic product rose 8.4 percent from a year earlier, according to a preliminary estimate made on Aug. 11. The ministry was expected to publish a detailed forecast on Sept. 7.
Nordea, the biggest lender in the Nordic region, on Aug. 31 raised its forecast for GDP expansion this year to 7.5 percent from 5.7 percent. Growth will slow next year to 3.6 percent, it said. SEB, the second-largest Baltic lender, said last week that it increased its forecast for this year to 6.5 percent and sees next year’s advance at 3.5 percent.

The Baltic nation, which went through the EU’s second-deepest contraction in 2008 and 2009 behind Latvia, is due to return to pre-crisis GDP levels, adjusted for inflation, by 2015, according to central bank estimates.
“We are experiencing turbulence on a global scale,” Ansip said. “Whatever happens to the global economy, we know that Estonia is much better prepared for this than we were three years ago.”
Estonia’s economy, in case of another global downturn, regardless of how well prepared it may now be, will not remain unaffected.

Chief economist of Nordea Estonia Tonu Palm stated last week, when commenting on the new economic outlook compiled by the bank, that the likelihood of a new economic decline in the United States and in Europe is nearing 50 percent and it would have a significant impact on Estonia, reports National Broadcasting.
“In comparing the current state with that in spring, the situation is entirely different; major changes have taken place in only a few months,” said Palm.

“It is my personal opinion that if the decline on stock markets should reach below critical levels, we would be in a new economic decline,” he added.
Nordea’s prediction that Estonia’s GDP will grow by 3.6 percent is based on the premise that Europe and the United States will be able to avoid economic decline. The bank’s base outlook is that the economic decline can be narrowly avoided. If, however, a worse trend will occur, it would mean that Estonia’s exports, as well as domestic consumption, would fall and that, in turn, would mean smaller economic growth.

Palm emphasized, however, that a new setback would not be comparable with the economic crisis that is already over. “After all, our economy has been through a major adjustment,” he said.