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International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 17:19

EY lowers Estonia's economic growth forecast for 2014

BC, Tallinn, 29.09.2014.Print version
Ernst & Young lowered in the fresh Eurozone economic forecast the economic growth forecast for Estonia and the Eurozone as a whole, reports LETA.

EY said that the Eurozone recovery is expected to gain momentum gradually after disappointing near-stagnation in the first half of 2014. Despite the easing of interest rates by the European Central Bank (ECB) in June and September, growth is expected to remain lackluster and fragile. EY forecast GDP growth of 0.9% this year, down from the 1.1% projected in our June report, 1.5% in 2015 and 1.7% in 2016. This is substantially lower than the pre-crisis average of 2.3% in 1997-2007.

 

However, the pace of the economic upturn will remain uneven across Eurozone countries. In particular, a faster upswing is expected in economies that have been prompt to implement structural reforms, EY said.

 

Regarding Estonia, EY said that latest estimates suggest that Estonia’s economy expanded by 0.5% in the second quarter of 2014. "Although this is encouraging, we have downgraded Estonia’s growth forecast as the escalation of the Ukraine-Russia crisis will have an adverse impact in the second half of the year," EY said. "We now expect GDP to expand by just 0.7% in 2014 and 2.7% in 2015, compared with our June projections of 1.6% and 3.2% respectively."

 

EY said that despite these developments, exports will be the main growth driver in the near term. Rising demand in Estonia’s other important trading partners suggest that export growth will accelerate to 2.5% in 2014 and 6.3% in 2015, after increasing by just 1.8% in 2013. The outlook for domestic demand is also upbeat.

 

Although Estonia’s growth outlook is sound, downside risks, stemming from the possibility of more negative impacts of the Ukraine crisis, higher inflation and lower competitiveness, dominate the forecast. But with government debt at 10% of GDP, there is plenty of room for fiscal stimulus in the event that these risks materialize, EY said.






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