The research shows that the country’s economy contracted by a seasonally adjusted 0.9% in Q2 of this year, following a 0.5% fall in Q1. Furthermore, Estonian’s GDP is now falling at an annual rate of 1.4%, according to Capital Economics.
Capital Economics projects that Latvia will soon join Estonia in recession. "The Latvian economy grew by just 0.2% year-on-year in Q2. This appears consistent with a contraction in seasonally adjusted GDP of 1.5%, the first quarterly fall since 1998. But it’s only a matter of time before Latvia joins Estonia in recession," the company said.
The economic group blames the bursting of the Baltic property market bubble and a sharp decrease in consumer spending, for the financial meltdown.
The latest research from Knight Frank shows that average property prices in Estonia and Latvia depreciated by nearly 11% and 6% respectively in Q1 2008.
Lithuania remains the most stable Baltic property market, with prices remaining stable.
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