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Estonia Avoids Recession as Economic Growth Misses All Estimates

Estonia’s economy expanded less than analysts forecast, narrowly avoiding a technical recession.

Gross domestic product rose 1.3 percent in the second quarter from a year earlier, compared with 1.1 percent in the prior three months, the statistics office in the capital, Tallinn, said today on its website. That was below all four forecasts in a Bloomberg survey, which had a median estimate of 2.6 percent. GDP grew a seasonally adjusted 0.1 percent from the first quarter after shrinking 1 percent in the January-March period.

The $22-billion economy of the newest euro member is lagging behind expansion in the neighboring Baltic countries of Latvia and Lithuania as public construction shrinks after benefitting from the United Nations’ carbon quota sales in the past two years. Weak export demand from Finland, Sweden and Russia prompted the central bank in June to cut its 2013 economic growth forecast to 2 percent from 3 percent.

“In all three Baltics countries, much of the slowdown can be attributed to weaker external demand and, hence, exports,” Jekaterina Rojaka, DNB ASA (DNB)’s Baltic economist, said by e-mail. “The development of the Nordic countries has been muted, while most recent encouraging indicators from Germany and other euro-zone members have not yet translated into a rising number of orders.”

Estonia, which adopted the euro in 2011, has weathered Europe’s debt crisis as Swedish and Finnish demand helped its economy recover from a 20 percent contraction in the wake of Lehman Brothers Holdings Inc.’s 2008 demise.

Finland’s working-day adjusted GDP shrank 4.2 percent in April, the most since December 2009, and Sweden’s economy shrank 0.1 percent in the second quarter from the previous three months. Russia’s economic growth unexpectedly slowed in the second quarter to 1.2 percent from a year earlier.

Estonia’s central bank pointed to weak exports and public spending as reasons for the second-quarter slowdown, reiterating its economic growth forecast for this year, according to an e-mailed statement.

To contact the reporter on this story: Ott Ummelas in Tallinn at

To contact the editor responsible for this story: Balazs Penz at

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