Estonia

RGE's Q1 2010 Estonia Outlook

Estonia endured one of the EU’s deepest downturns in 2009. In contrast to booming annual average growth of over 7% from 2003 to 2007, the economy contracted an estimated 15% last year. Only the Latvian and Lithuanian economies posted bigger contractions. In addition to contending with the negative effects of the global downturn, Estonia is suffering a painful hangover from years of credit-fueled growth that were accompanied by a heavy build-up of external imbalances. As the country’s exchange rate is fixed to the euro in a currency board, Estonia is now undergoing a painful process of internal deflation—wage and price cuts—to restore competitiveness.

Recovery will be slow. RGE expects the economy to contract 2% in 2010 with a resumption of positive annual growth in 2011. A return to the soaring growth rates of earlier this decade is neither likely, nor sustainable.…

Read the Q1 2010 Estonia Outlook.