MoF: GDP Decline Still Within Margin of Error ({{commentsTotal}})

Source: Photo: Reuters/Scanpix

The Finance Ministry played down concerns in light of revised GDP figures today which indicate the country has slipped into recession, often defined as two consecutive quarters of economic decline.

Finance Ministry analyst Madis Aben told that the drops (including a 0.2 percent decline in Q2) were relatively insignificant and still within the margin of error, and they wouldn't significantly affect the ministry's recently released growth forecast.

"Looking at how much last year's growth figures were revised, then 0.2 percent this way or that way is not very significant,“ Aben said.

Furthermore, he said, the fresh estimates were affected by a slight improvement in the fourth quarter as well as upgraded adjustments to the last four years, 2009-2012.

"They [lower Q2 results] are not especially important when taking into account the revision of that whole period,“ Aben said.

"The biggest changes occurred in 2009, 2011 and 2012, when the level rose. That is one reason second quarter growth was quite modest,“ he said. He added that nominal growth and tax receipts so far this year have been strong.

Swedbank analyst Tõnu Mertsina was also optimistic, saying export demand is slowly improving and expecting modest growth for the second half of the year.

"At current prices, a significant slowdown in economic growth did not occur, whereas first quarter growth even sped up,“ Mertsina said.

"Therefore the GDP deflator grew, which is quite surprising because the growth of most prices has slowed down instead,“ he said.

But SEB analyst Ruta Arumäe said the fresh figures, nevertheless, are still an indicator to be taken into account.

Speaking to Postimees, she said: "In light of the new figures it has emerged that the economy is in a genuine recession,“ Arumäe said. "The quarterly decline in the first quarter was not temporary and even deepened slightly in the second quarter. We are not dealing with a substantial decline, but it is still a symbolic compass."

In the yearly comparison, second quarter growth was revised down from 1.3 to 1 percent in today's report. The Estonian economy was last in recession in 2009.