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Swedbank lowers Estonia's 2017 GDP growth estimate to 2.2 percent

Swedbank has lowered its gross domestic product (GDP) growth forecast on Estonia for 2017 by 0.2 percent to 2.2 percent.

At the same time, the bank raised its forecast for 2018 by 0.3 percent to 2.8 percent, according to the freshly released Swedbank Economic Outlook.

According to the forecast, household consumption is to grow 3 percent this year and 3.8 percent in 2018, while consumer prices are expected to grow 3 percent in 2017 and 2.7 percent next year.

Swedbank forecasts that the unemployment rate is to total 7.5 percent in 2017 and 7.7 percent in 2018.

According to the Economic Outlook, the real growth of net wages is to total 2.2 percent this year and 8.7 percent next year.

The export of goods and services is expected to grow 3.5 percent this year and 3.7 percent next year, while the import of goods and services is to grow 5 percent in 2017 and 4.5 percent in 2017.

Growth of investments to recover in 2017

According to Swedbank, the export opportunities of Estonian enterprises should improve and growth of investments should recover this year as well.

"The average import demand of Estonia's biggest trade partners is to improve this year in our estimation," Tõnu Mertsina, chief economist at Swedbank, said in a press release.

"Producer and export prices are increasing, which helps companies to improve their revenue and reduces the negative impact of increased labor expenses on companies' financial situations," he continued. "According to our forecast, the growth of investments will recover this year." This recovering of investments as well as an improved outlook on foreign demand is to accelerate GDP growth to 2.2 percent this year, the bank forecasts.

"Households' strong housing investments will continue and in its 2017 budget, the government has promised to substantially increase investments with support from European Union Structural Funds," Mertsina explained. "In addition, investments of non-financial enterprises should increase as the confidence of enterprises has improved; there are more export opportunities and the share of unused capital is declining."

According to the analyist, Estonia's EU presidency in the second half of 2017 will increase the public sector's expenses. "In our opinion, the period will also increase the activity of several enterprises in the service sector, especially in accommodation, food, transport, conference services, media and ICT," he added.

The confidence of enterprises and households is increasing and their loan portfolio increase is accelerating, Mertsina said. "The share of bad loans in the loan portfolio is low and it has declined in the last few years, which shows that enterprises and households can meet their commitments," the analyst noted.

Editor: Editor: Aili Vahtla

Source: BNS

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