SEB slashes Estonia's 2013 GDP growth estimate from 3.3 to 1.5 pct

Photo: Arvo Meeks / Lõuna-Eesti Postimees

SEB in its fresh economic outlook expects the Estonian economy to grow 1.5 percent this year compared with a forecast of 3.3 percent held out in May.

In 2014 the Estonian economy is estimated to grow 3.3 percent, according to the SEB Nordic Outlook published on Tuesday. The latter figure represents a downward reduction by four percentage points from the May forecast of 3.7 percent.

In 2015 Estonia will see GDP growth of 3.5 percent, according to SEB.

The fresh forecast puts Estonia's CPI inflation at 3.2 percent in 2013 and at 2.5 percent in 2014. In May SEB expected inflation in both years to be 3.3 percent.

Latvia is expected to post GDP growth of 3.5 percent and Lithuania of 3.2 percent this year. In 2014, Latvia is due to see growth 4.8 percent and Lithuania of 3.5 percent.

SEB pointed out that Estonia's growth decelerated unexpectedly hard in the first half of 2013, as second quarter GDP rose by only 1.3 percent year-on-year. The capital spending slowdown after last year's excessive surge was more powerful than expected; for example, government investments financed by funds from emission rights fell sharply.

Exports, which weigh heavily in the Estonian economy, were also not strong enough to offset stable imports. Meanwhile private consumption is maintaining momentum. In 2014, households will also benefit from real wage increases of some 3 percent, meaning nominal growth of about 5.5 per,cent, and a further decline in unemployment. Exports will strengthen somewhat and the base effect from the above-mentioned capital spending will disappear. Government investments meanwhile while remain weak in several years, SEB said.