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Estonia Business Forecast Report Q4 2012

Estonia Business Forecast Report Q4 2012 - new country guide report published


Companies & Markets

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31.12.2012 21:15:00 - Estonia Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com

(live-PR.com) - Estonia´s economic growth will slow to 2.7% in 2012 in real GDP terms, from 7.6% in 2011. While this remains the strongest economic growth figure in the eurozone, the economy is not immune from the weakened external demand in the bloc, which we expect to contract by an aggregate 0.6% this year. A high degree of uncertainty over the future

 

of eurozone economic growth will feed through to lower private consumption and investment growth, both of which have been integral drivers of economic recovery in the Baltic country. We expect the fiscal deficit to widen in 2012 before narrowing in 2013 and coming into balance by 2015.

While we expect that government plans to use fiscal reserves to cover the deficit will be sufficient, in the event that international debt markets had to be tapped, we believe this t would be on favourable terms to Estonia owing to the country´s strong fiscal credentials and the lowest public debt load in the eurozone. The passing of legislation that requires the country´s main natural gas company to unbundle transportation infrastructure on June 6 by a wide majority affirms our view for tensions between the Baltic states and Russia to remain a key theme of this decade. While we do not expect this issue to exacerbate tensions between Estonia and Russia, we continue to expect relations between the two nations to remain strained over our forecast period.

Major Forecast Changes

We have revised Estonia´s average consumer price inflation (HICP) forecast to 4.0% this year from a previous forecast of 4.2%. We expect easing price pressure to continue over the course of 2012 and into 2013 as economic expansion slows and global commodity prices remain well supported but do not spike higher. We have revised our forecast for Estonia´s budget deficit this year to 2.4% of GDP from a previous forecast of 2.3%. This has come largely as a result of better than anticipated revenue growth in the first quarter.

Key Risks To Outlook

As a member of the eurozone, Estonia remains highly exposed to the sovereign debt crisis; an intensification of the crisis would have a deleterious impact on Estonia´s macroeconomic outlook.

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Author:
Mike King
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