TALLINN — Decline isn’t usually a cause for celebration, but while Estonia’s gross domestic product decreased 9.4 percent in the fourth quarter, it’s the fastest-recovering economy in the battered Baltic states.

Statistics Estonia released its flash GDP estimate Thursday, showing that the country’s gross domestic product decreased by 9.4 percent in the fourth quarter compared to the same period in the previous year and up 2.6 percent compared to the third quarter. The overall decline in 2009 was 14 percent.

The economy improved in all areas except the commerce, due to weak domestic demand caused by high unemployment and reducing salaries. Exports have been increasing since the [private_supervisor]second quarter, and the production capacity in the manufacturing is declining less as the demand abroad improves.

How much will domestic demand hurt recovery?

Swedbank analyst Maris Lauri said the 14 percent decrease matches the bank’s prognoses. Lauri expects the Estonian economy to grow in 2010, like the Lithuanian economy is now projected to.

“According to our prognosis, the Estonian economy will grow by 1.5 percent this year, thanks to external demand and investments,” Lauri told Baltic Reports. “At the same time the domestic demand will stay very weak at least on the first half of the year.”

However Sander Klaos, director of the department of analysis at Nordea’s Estonia subsidiary, said that the domestic demand in the fourth quarter was a little smaller than expected, and he is pessimistic about 2010.

“We do not expect a big growth this year, however we expect the decline to slow down,” Klaos told Baltic Reports.

Andrus Sääsk, head of the macroeconomy department in the Ministry of Finance said the GDP results are somewhat more positive than the ministry was expecting, but notes that it was caused by temporary factors that will not sustain a recovery through the year.

“The alcohol, tobacco and motor fuel excises were applied in the beginning of the year, so the stocks of those products were increased, and that gave a positive move to the GDP in the fourth quarter, but will give a negative influence in the beginning of this year,” Sääsk told Baltic Reports.

So is it fair to say the crisis is over? Karel Lember, an economic analyst in the Ministry of Economic Affairs and Communications, says no.

“Although the growth compared to the last quarter is the first positive sign, the recovery of the economy the way it was during the Baltic Tiger boom is not possible, and the growth will be slow,” Lember told Baltic Reports.

[/private_supervisor] [/private_subscription 1 month]second quarter, and the production capacity in the manufacturing is declining less as the demand abroad improves.

How much will domestic demand hurt recovery?

Swedbank analyst Maris Lauri said the 14 percent decrease matches the bank’s prognoses. Lauri expects the Estonian economy to grow in 2010, like the Lithuanian economy is now projected to.

“According to our prognosis, the Estonian economy will grow by 1.5 percent this year, thanks to external demand and investments,” Lauri told Baltic Reports. “At the same time the domestic demand will stay very weak at least on the first half of the year.”

However Sander Klaos, director of the department of analysis at Nordea’s Estonia subsidiary, said that the domestic demand in the fourth quarter was a little smaller than expected, and he is pessimistic about 2010.

“We do not expect a big growth this year, however we expect the decline to slow down,” Klaos told Baltic Reports.

Andrus Sääsk, head of the macroeconomy department in the Ministry of Finance said the GDP results are somewhat more positive than the ministry was expecting, but notes that it was caused by temporary factors that will not sustain a recovery through the year.

“The alcohol, tobacco and motor fuel excises were applied in the beginning of the year, so the stocks of those products were increased, and that gave a positive move to the GDP in the fourth quarter, but will give a negative influence in the beginning of this year,” Sääsk told Baltic Reports.

So is it fair to say the crisis is over? Karel Lember, an economic analyst in the Ministry of Economic Affairs and Communications, says no.

“Although the growth compared to the last quarter is the first positive sign, the recovery of the economy the way it was during the Baltic Tiger boom is not possible, and the growth will be slow,” Lember told Baltic Reports. [/private_subscription 1 month] [private_subscription 4 months]second quarter, and the production capacity in the manufacturing is declining less as the demand abroad improves.

How much will domestic demand hurt recovery?

Swedbank analyst Maris Lauri said the 14 percent decrease matches the bank’s prognoses. Lauri expects the Estonian economy to grow in 2010, like the Lithuanian economy is now projected to.

“According to our prognosis, the Estonian economy will grow by 1.5 percent this year, thanks to external demand and investments,” Lauri told Baltic Reports. “At the same time the domestic demand will stay very weak at least on the first half of the year.”

However Sander Klaos, director of the department of analysis at Nordea’s Estonia subsidiary, said that the domestic demand in the fourth quarter was a little smaller than expected, and he is pessimistic about 2010.

“We do not expect a big growth this year, however we expect the decline to slow down,” Klaos told Baltic Reports.

Andrus Sääsk, head of the macroeconomy department in the Ministry of Finance said the GDP results are somewhat more positive than the ministry was expecting, but notes that it was caused by temporary factors that will not sustain a recovery through the year.

“The alcohol, tobacco and motor fuel excises were applied in the beginning of the year, so the stocks of those products were increased, and that gave a positive move to the GDP in the fourth quarter, but will give a negative influence in the beginning of this year,” Sääsk told Baltic Reports.

So is it fair to say the crisis is over? Karel Lember, an economic analyst in the Ministry of Economic Affairs and Communications, says no.

“Although the growth compared to the last quarter is the first positive sign, the recovery of the economy the way it was during the Baltic Tiger boom is not possible, and the growth will be slow,” Lember told Baltic Reports. [/private_subscription 4 months] [private_subscription 1 year]second quarter, and the production capacity in the manufacturing is declining less as the demand abroad improves.

How much will domestic demand hurt recovery?

Swedbank analyst Maris Lauri said the 14 percent decrease matches the bank’s prognoses. Lauri expects the Estonian economy to grow in 2010, like the Lithuanian economy is now projected to.

“According to our prognosis, the Estonian economy will grow by 1.5 percent this year, thanks to external demand and investments,” Lauri told Baltic Reports. “At the same time the domestic demand will stay very weak at least on the first half of the year.”

However Sander Klaos, director of the department of analysis at Nordea’s Estonia subsidiary, said that the domestic demand in the fourth quarter was a little smaller than expected, and he is pessimistic about 2010.

“We do not expect a big growth this year, however we expect the decline to slow down,” Klaos told Baltic Reports.

Andrus Sääsk, head of the macroeconomy department in the Ministry of Finance said the GDP results are somewhat more positive than the ministry was expecting, but notes that it was caused by temporary factors that will not sustain a recovery through the year.

“The alcohol, tobacco and motor fuel excises were applied in the beginning of the year, so the stocks of those products were increased, and that gave a positive move to the GDP in the fourth quarter, but will give a negative influence in the beginning of this year,” Sääsk told Baltic Reports.

So is it fair to say the crisis is over? Karel Lember, an economic analyst in the Ministry of Economic Affairs and Communications, says no.

“Although the growth compared to the last quarter is the first positive sign, the recovery of the economy the way it was during the Baltic Tiger boom is not possible, and the growth will be slow,” Lember told Baltic Reports. [/private_subscription 1 year]

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