Now Available: Estonia Business Forecast Report Q1 2014

From: Fast Market Research, Inc.
Published: Fri Nov 22 2013

We believe Estonia is on a sustainable growth trajectory following the deep recession brought on by the eurozone debt crisis, with economic growth to average 3.1% in the next three years before gradually settling towards long-term trend growth of 2.6%. Domestic demand will be the main driver of growth over the medium term, as slow to recover external demand hinders stronger export growth.

We maintain a positive view towards Estonia's fiscal trajectory. Following two straight years of low-level budget deficits, conservative expenditure targets and continued economic growth will allow for a return to fiscal surplus by 2014. Meanwhile, public debt will remain the lowest in the European Union as a percent of GDP.

Full Report Details at

Popular support for Estonia's ruling Reform Party, in power since 2007, has fallen significantly and is unlikely to regain previous highs. While the pro-Russian Centre Party will remain popular amongst the ethnically Russian electorate, its support base has grown and now poses a threat to the Reform Party's majority in upcoming Parliamentary elections in 2015.

Major Forecast Changes

We have revised down our full-year growth estimate for 2013 for a second quarter in a row, as the ongoing slump in gross fixed capital formation continues to weigh on economic activity. We now expect real GDP to grow by 1.9% in 2013, down from our previous forecast of 2.1%. However, this has not fundamentally altered our view on the medium to long term growth prospects of the economy.

Key Risks To Outlook

As a member of the eurozone, Estonia remains exposed to any renewed flare-up of the sovereign debt crisis. The extreme openness of the Estonian economy, where exports plus imports represented 184.4% of GDP in 2012, means economic growth will remain extremely sensitive to external shocks.

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