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Estonian economy expanded record 11.4% in 2006 on spending

Estonia's economy, the second-fastest growing in the European Union in the Q4, expanded a record 11.4% for all of 2006, bolstered by consumer spending.

The revised pace in the Q4 was 10.9%, slower than the preliminary 11.3% reported on February 13 and the 11.3% rate achieved in the previous three months, the Tallinn-based Statistikaamet said on its Web site today.

Unemployment at 14-year lows and a 17.5% increase in wages during the Q4 are boosting spending power and pushing up inflation, which stood at 4.7% in February and beyond levels where Estonia can adopt the euro. The Estonian central bank said on February 6 the risk that the €11.4 billion ($15.1 billion) economy may overheat is diminishing as people take on debt at a slower pace and house prices stabilize.

It said dropping the local currency, the kroon, is the most important economic policy goal for the coming years. Talks to form a new coalition are ongoing after March 4 elections. Latvia's economy grew 11.7% in the Q4, the fastest pace in the European Union. Lithuania's economy grew 6.9% in the Q4. (Bloomberg)