TALLINN — Estonia’s Ministry of Finance is projecting that the country’s economy will start growing again in 2011 as its primary European export markets recover from the global downturn.

Estonia’s gross domestic product shrank 15.8 percent for the first half of this year compared to the same period in 2008. The ministry predicts that the GDP drop has now reached its lowest point and that the long haul back to positive growth will begin later this year, an upgrade from previous estimates.  Now the ministry forecasts that in 2010 GDP could fall by as little as 2 percent and in 2011 could return to growth.

Estonia's gross domestic product from 1996 until now with the Ministry of Finance's revised future projections through 2013. Source: Ministry of Finance

“Estonian growth will recover in 2011 in case when export markets’ economic situation is improving. Positive effects from export recovery are expected to carry over to domestic demand through improving confidence,” the ministry’s official forecast reads. “The deepening of the economic recession of main export partners has brought along sharp decrease of Estonian exports during the first six months of 2009.”

The ministry points to the stabilizing of foreign economies, primarily in Europe and says this could accelerate Estonia’s expected recovery. Exports could start to recover as early as later this year. However, there is a natural lag before these exports impact upon employment levels, consumer confidence and ultimately domestic consumption, so the ministry predicts 2011 is the earliest the economy will return to positive growth.