TALLINN - Eesti Pank, Estonia's central bank, published its economic forecast Dec. 1, claiming that economic growth should amount to 5.2 percent in 2004, significantly higher than earlier estimates.
This year the economy is expected to grow only 4.4 percent, mostly due to domestic consumption.
At the same time this rate of growth is still 4 percent higher than the expected growth of the euro zone, the bank noted.
Next year, provided external demand picks up, Estonia's economic growth should be 5.2 percent. Growth would be driven by external demand.
The bank wrote that it expected additional growth to come from the Estonian export industry and the upturn in global economy.
However, if export volumes fail to increase and the current-account deficit remains high, economic growth could slow to 2.5 percent, said the central bank.
Bank economists expect inflation to remain at 1.5 percent this year, which is the lowest-ever for the country. But next year inflation could pick up and reach around 4 percent, mainly because of the rise in administratively regulated prices.
The bank expects the current-account deficit to fall to 11 percent of GDP in 2004.
Speaking of the external economic climate, Eesti Pank wrote that while there were signs of an upturn in the global economy, it expected a positive impact on Estonia's export industry.
Exports are expected to increase by a modest 4.2 percent in fixed prices in 2003. Next year's growth should be much higher, up to 8.7 percent claims the bank, mainly because of the upturn in the global economy and greater demand for Estonian exports.
The current account deficit is expected to reach 14 percent in 2003, mainly triggered by the imbalance between exports and imports. In the long term, the current-account deficit should contract as a result of stabilization of capital inflows and domestic savings.
There is also a belief among observers that the European Central Bank will increase rates in 2004.
Private consumption in Estonia in 2003 is expected to increase by 6.7 percent in real terms. In the next two years rising interest rates and higher inflation would reduce the consumption rates.
