All three Baltic countries are facing a new challenge of coping with a slowdown after years of double digit growth, and of avoiding a hard landing. The Estonian government is already having to make budget cuts due to lower than expected revenues and lower growth could put Latvia and Lithuania under fiscal pressure too. “The long-awaited economic adjustment is under way in Estonia, but it is no longer as smooth as expected due to the less favorable external environment,” the central bank said. The 2008 growth outlook was down from a forecast, made in October last year, of 4.3%. It expected 2009 GDP growth of 3%, down from a forecast 5.7%.
Inflation was seen speeding up in 2008 to 9.8% from 6.8% in 2007, but falling to 3.0% by 2010. The rate of price rises has forced Estonia to delay its plan to adopt the euro, originally set for 2007. “The central bank expects the … inflation rate to reach close to the Maastricht inflation criterion at the end of 2010. In order to meet the criterion, the timing of administrative measures influencing prices is extremely important,” it said.
The bank said that in the less favorable global environment, rising prices and uncertainty had hit domestic demand. The bank saw the current account gap at 10.2% of GDP this year and 7.5% in 2009 after 17.4% in 2007. It urged the government to support the economic adjustment by continuing to pursue responsible fiscal policies. It said spending had to be cut by about 3 billion kroons ($303.4 million) this year, otherwise the fiscal deficit would be more than 1% of GDP. “In order to balance the budget, planned expenditure should be cut by 8 and 11 billion kroons in the next two years, respectively,” it added. (Reuters)
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
