Analytics, Baltic Export, Economics, Estonia, Markets and Companies

SEB lowered Estonia's economic outlook for 2013 from 3.8% to 3.3%. Nevertheless, the Baltic States have the strongest growth forecasts in Europe, writes LETA.

Comments from the SEB Chief Economist, Ruta Arumäe: "The growth in USA is led by household consumption that is supported by increase in property and stock prices and by approaching the end of debt level reduction. The growth of developing economies improves modestly, although many of them have lately experienced setbacks. The activities of central banks ensure low interest rates and unlimited liquidity supply, while austerity measures of the governments are being slackened. On the negative side, the euro zone is still fighting with a dangerous combination of weak economic growth, undercapitalised banking system, and insufficient credit provision, high public sector debt, and political instability. Central banks are still postponing coming out of the slackening of monetary policies. This is enabled by a low inflation rate and weak economic growth. The main risks that accompany unusual monetary policy measures are the price bubbles on financial markets and the inability and unwillingness of politicians to make the necessary reforms".

According to SEB estimates, the European Central Bank lowers interest rates in summer by 0.25 pp and that these rates should remain valid until 2014. SEB does not expect the European Central Bank to establish negative interest rates because this would cause systematic technical problems and undesirable effects on the functioning of the interbank market.

"The euro zone is dealing with serious challenges that keep the prospects of the euro project still unclear. We [SEB specialists] expect the euro zone to experience a recession of 0.7% in 2013 and a rise of 0.7% in 2014. German economy is also influenced by the decline in the euro area and for this year we expect Germany to have a growth of 0.3% and in 2014 1.3%. French economy is doing even worse. Efforts to create a political union in Europe in order to have a significant stabilizing factor have been progressing in shorter and slower steps. Re-evaluating austerity measures also creates insecurity about the sustainability of international support programs. During the next quarters, US economy will continue to recover after temporary economic activity slowdown," the expert said in a statement.

Estonia's main export markets have also been given an insight by SEB's economist.

"Sweden is recovering, although very slowly. Recession of the euro zone affects negatively export and investments. In Sweden, we expect the economic growth to be 1.3% and 2.5% in 2013 and 2014, respectively. The outlooks for Nordic countries also differ. Danish and Finnish economies have become stagnant and are in recession because of export decline and weak domestic consumption. Recession will continue in Finland this year. Weakening export markets also affect Estonia and in conjunction with weaker than expected growth in the beginning of the year we have adjusted the economic growth forecast for Estonia and in 2013 it is 3.3%. In 2013, the expected growth in Latvia and Lithuania is 3.5% and 3.2%, respectively. The Baltic States continue to have the strongest growth forecasts in Europe. The economies of Baltic states mainly grow thanks to domestic consumption. We still think that Latvia will be allowed to join Euro after the evaluation this spring and that Lithuania has a 50% chance to achieve the same a year later,” Arumäe noted.