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Swedbank leaves 2018 economic growth forecast unchanged at 3.5%

Swedbank released its fresh Economic Outlook on Thursday.
Swedbank released its fresh Economic Outlook on Thursday. Source: Postimees/Scanpix

The Estonian economy is expected to grow at a rate of 3.5% this year, Swedbank said in its fresh Economic Outlook, leaving its economic growth forecast unchanged from the estimate offered in its previous outlook.

The fresh forecast likewise leaves unchanged the growth estimates for Estonia for the next couple of years — at 3.2% in 2019 and 2.7% in2020.

Swedbank also left the economic growth outlook on Lithuania unchanged at 3.6% in 2018, 2.5% in 2019 and 2% in 2020. Latvia's 2018 forecast, meanwhile, improved somewhat — from 4% to 4.5%. The Latvian economy is expected to grow 3% in 2019 and 2.5% in 2020.

Regarding Estonia, the Economic Outlook says that household consumption, which is estimated to grow by 3.7% in both 2018 and 2019, is to make a bigger contribution to economic growth over the next three years. Spending by the government sector, meanwhile, will contribute less to growth in 2018, while export growth will be smaller than previously estimated. 

The growth estimate concerning the consumer price index (CPI) for 2018 was left at 3.4%, while inflation is forecast to slow down more in the following years than previously estimated. Inflation is forecast to decelerate to 2.8% in 2019 and to 2.2% in 2020.

Unemployment is expected to decline to 5.5% this year and 5.1% in 2019, but increase again to 5.3% in 2020. The rate of unemployment is expected to continue growing slowly in 2019, but zero growth is expected in 2020.

Compared to the bank's summer forecast, improvements are expected in Estonia's budgetary position and debt burden. While the summer forecast put the size of the 2018 budget deficit at 0.5%, 2019 deficit at 0.3% and 2020 deficit at 0.2%, the fresh forecast estimates a minor surplus to be registered in all three years. The Estonian government sector's debt burden, meanwhile, is expected to decline to 6.6% by 2020.

"The Nordic and Baltic countries are all performing well," the outlook says. "Growth has decelerated in Estonia and Lithuania and is epected to ease in all Baltic countries in 2019 and 2020. Household income and domestic demand remain strong, but increasing unit labour costs and weaker external demand have started to cut into exports."

Labour shortage remains a primary factor limiting production, but Swedbank expects wage growth to ease in the coming years. "Overall, all three Baltic economies remain well balanced, show little signs of overheating and are well positioned to meet external shocks," it said.


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Editor: Aili Vahtla

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