Nordea lowers Estonia's GDP growth forecast to 3.2 percent

Photo: SCANPIX

Nordea Pank has lowered the 2013 GDP growth estimate for Estonia to 3.2 percent from December's 3.5 percent in its fresh economic forecast published on Tuesday.

The economic growth forecast for 2014 remained unchanged at 3.8 percent.

Consumer prices are seen to rise 3.5 percent this year and 3.3 percent in 2014, corresponding to the December inflation forecast.

Unemployment is estimated to remain at the level of 9.2 percent this year and fall to 8.5 percent next year.

"Estonia's open economy cannot continue growing at the previous pace without economic recovery in Scandinavia and Europe. Return to the fast growth track can be predicted for Estonia along with an increase in export volumes only in the second half of the next year," the bank's chief analyst Tonu Palm told reporters on Tuesday.

In Palm's words, developing markets and the United States will be the first to emerge from the crisis. From there growth will spread to Europe but with a delay. The fast progress of developing markets will first of all benefit exporting and competitive economies, but competitiveness has received less attention in Europe, the analyst said.

According to the Nordea forecast, private enterprise investment demand will remain high, underpinned by growing business volumes and profitability and gradual recovery of the real estate sector. "Estonia is still among the fastest growing European economies, being outpaced only by Latvia and Lithuania," Palm said. "At present, Estonian companies are increasing their market shares and business volumes are growing faster than in Finland or Sweden."

The shortfall of Estonia's current account will amount to 2.1 percent of gross domestic product this year and 2.2 percent in 2014, Nordea predicts. The state budget is expected to run a deficit of 0.3 percent of GDP in 2013 and 0.1 percent the next year.