EC: Debt Crisis Could Seriously Damage Estonia (1)
The European Commission warned today that Estonia's sensitivity to changes in foreign trade render it vulnerable to the Eurozone debt crisis.
Having released a fresh economic forecast on Thursday, the commission said falling exports could damage Estonia's economic outlook and budgetary situation, forecasting higher growth than previously predicted for 2011, but lower growth for 2012.
Estonia's economy will grow by 8 percent this year and 3.2 percent next year, according to the forecast. Next year's forecast is .2 percent above what the Finance Ministry forecasted.
Although Estonia is better off than it was in 2008, decreasing foreign demand and rising insecurity will further inhibit consumer and investor confidence, the commission said.
The EC forecast expects a 1.8 percent budget deficit for Estonia next year, compared to the Cabinet's 2.1 percent. The balanced budget has in recent years been aided by one-time sources of revenue, chiefly the sale of carbon credits, the commission said.
Overall, the EU economy is predicted to grow by 0.5 percent next year; however, the commission's vice president, Olli Rehn, warned of a new potential recession.