Ernst & Young Predicts Strong Growth, Warns of Export Risks
Estonia's Rapid GDP growth this year has been mainly thanks to strong exports to Sweden and Finland.
( Photo: Postimees/Scanpix )
Estonia's economic growth will continue to outpace those of other Eurozone members, but the country should keep an eye out for trouble on the export front, according to a forecast released October 4 by consultancy firm Ernst & Young.
The autumn report, published in cooperation with Oxford Economics, predicts that the jump in exports that lifted the country's GDP growth to a dizzying 8.4 and 8.5 percent in the first two quarters will subside in the second half of the year.
"But even with a significant slowdown expected in H2, the strong H1 performance means that we have raised our 2011 GDP growth forecast to 7.2 percent, with 3.8 percent expected for 2012," the report said.
The main factor skewing the forecast to the downside is the threat that an escalation of the sovereign debt crisis or a slowdown in Sweden and Finland would severely damage export peformance.
However, the blow from such a scenario would be softened by the fact that Estonia's fiscal house and credit ratings are in good shape, giving the government the option to create new fiscal stimulus if needed.
Discussing the report on ETV, Ernst & Young Baltic audit partner Ivar Kiigemägi said that a return to crisis conditions, should it happen, wouldn't have nearly as severe an impact as the initial crisis because, unlike earlier, Estonia's economy is not over-inflated.
"There is no housing bubble, we have strong banks. Even if some kind of crisis occurs, Estonia won't be affected as badly as it was in 2008-2009. But it is important to monitor the situation of our export markets," he said.
Like the organization's spring report, the autumn edition tips Estonia as the fastest-growing Eurozone economy over the next five years, predicting an average 4.9 percent GDP growth for the 2011-2015 period.