Nordea Bank Downgrades Growth Forecast ({{commentsTotal}})

Nordea analyst Tõnu Palm
Nordea analyst Tõnu Palm Source: (Postimees/Scanpix)

Nordea Bank downgraded its growth prediction for Estonia to 1.2 percent from the 2.8 percent growth rate it predicted in March.

According to the bank, Estonia’s growth has been slowed down by the rapid cooling of economy in the first quarter, the slow recovery of foreign markets and the risks related to the Ukrainian crisis, reported on Wednesday.

To restore growth, a more forceful turn in the Eurozone and the Nordic countries is needed, driven by not private consumption alone but also export and investments, said Tõnu Palm, the bank’s chief economist.

Out of Estonia’s trade partners, Germany, Sweden and the United Kingdom have better growth forecasts, influenced by the continued recovery of the Eurozone and the GDP of 3 percent predicted for the US, he said.

“To increase economic growth and taking the Russian and Ukrainian developments into account, Estonia would be wise to diversify its export markets even more and expand its activities in growing markets,” Palm said.

The improved economic confidence would allow for a gradual enlivening of Estonian export markets next year, the bank added.

The Estonian Central Bank cut its growth forecast to 0.7 percent from the 2.6 predicted last December. SEB bank is forecasting 0.5 percent growth. The Ministry of Finance is on the other end of the scale, predicting 2 percent growth, while the European Commission has forecast 1.9 percent. The OECD has predicted 1.2 percent growth for Estonia.