Estonia’s economy, which exited its longest recession since independence in 1991 last quarter, will probably grow on a quarterly basis in the three months through March, Finance Minister Jurgen Ligi said.
The pace of expansion will probably be slower than the 2.6 percent posted in the fourth quarter, the fastest in the 27- member European Union, and will “largely” depend on how well key Nordic and German export markets recover, Ligi said in an interview today in Tallinn.
“Growth this quarter won’t be as good as the last one, but it won’t be bad,” Ligi said. “Our full-year GDP forecast of minus 0.1 percent will probably become more optimistic in March.” He noted that year-end 2009 figures got a one-time boost from stock-building of alcohol, tobacco and fuel ahead of tax increases in January.
The $23-billion economy emerged from EU’s third-deepest contraction last year as a recovery in exports, led by wireless network gear and generators for wind turbines manufactured by local units of Ericsson AB and ABB Ltd. outweighed a slump in domestic demand. The ministry’s January forecast for GDP to shrink 0.1 percent this year may be raised in March, Ligi said.
Estonia seeks to become the third east European country to join the euro region after Slovenia and Slovakia. Prime Minister Andrus Ansip has cut the budget deficit by 9 percent of GDP to meet the terms of the switchover, exacerbating the slump in the economy that contracted 14.5 percent last year, according to Finance Ministry estimates.
Ligi said he is “100 percent convinced” the Baltic nation has fulfilled all “measurable” euro-adoption criteria. Tax collection data for the first two months of the year “give no reason to doubt” that Estonia can sustainably lower its budget deficit, he said.
The 10 former communist countries that have joined the EU since 2004 are obliged to adopt the euro once they meet fiscal and price stability conditions. The terms require governments to cap budget deficits at 3 percent of GDP, limit debt to 60 percent of output and to ensure inflation isn’t more than 1.5 percentage points above the average rate of the three countries in the euro region with the slowest price growth.
Standard & Poor’s Ratings and Fitch Ratings raised their outlooks for Estonia to stable from negative this month, citing increasing chances the Baltic nation adopts the euro next year.