Estonian Central Bank Raises GDP Outlook, Forecases 4.2% Growth in 2011

Estonia’s economy will grow faster than previously forecast this year and next as export demand improves, the central bank said.

Gross domestic product will expand 2.5 percent this year and 4.2 percent in 2011, the Tallinn-based Eesti Pank said today in an e-mailed statement. That compares with the bank’s April growth forecast of 1 percent and 4 percent, respectively.

The Baltic nation, which suffered the second-deepest recession in the European Union during the financial crisis, returned to annual growth in the second quarter as demand for its electronics and machinery increased in the Nordic region.

“Economic growth of the main trading partners was faster than expected in the first half of 2010, helping the Estonian economy to recover,” the central bank said. “The fast growth of trading partners will probably slow as the impact from the upturn in global trade and government-sector spending increases that supported it will start to wane.”

The central bank outlook exceeds Finance Ministry estimates released last month that forecast economic growth of 2 percent this year and 3.6 percent in 2011.

Estonia will have average annual inflation of 2.4 percent this year and 2.7 percent in 2011, the central bank said. In April, it forecast consumer-price growth of 1.3 percent this year and 1.1 percent in 2011.

“There is a threat the present price and wage levels will not sufficiently support new investment and job creation,” the bank said. Still, the increase in inflation in coming months due to rising food prices will probably remain temporary, it added.

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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