Ernst & Young Latest to Pare Down GDP Forecast ({{commentsTotal}})

Source: Photo: Postimees/Scanpix

Professional services organization Ernst & Young said Estonia's economy will grow 2.8 percent this year.  

That is less than it projected in March but is still, in E&Y's rankings, the highest in the Eurozone. It would be matched by the highest inflation in the Eurozone, 3.2 percent, E&Y said.  

Unemployment has started dropping and will fall to 8.4 percent next year, resulting in a structural labor shortage. 

"Taking all of the current trends into consideration, it can be said the situation is slightly worrisome," said Ernst & Young Baltic partner Ivar Kiigemägi.

"Stable economic growth will certainly result in some growth in nominal wages but it will likely as not increase the real wage," he said. "If productivity does not increase in the near future, it could happen that we will find orselves bringing up the rear in terms of economic growth."

To recap, the central bank and some commercial lenders have shaved their forecasts after a first quaretr in which the economy only grew 1.1 percent year on year. The central bank's forecast is 2 percent, Nordea is calling for 2.3 percent and the OECD isays 1.5 percent.