March 9 (Bloomberg) -- Estonian economic growth was the second fastest in the European Union in the fourth quarter, and quicker than previously estimated, led by construction and communications output.
Gross domestic product expanded 4.5 percent from a year earlier, lagging only Baltic neighbor Latvia at 5 percent, compared with a preliminary estimate of 4 percent and growth of 8.5 percent in the third quarter, the statistics office in the capital, Tallinn, said today on its website. Output shrank a seasonally adjusted 0.2 percent from the previous quarter, compared with an initial estimate of a 0.8 percent contraction.
“GDP growth was boosted the most by the fast growth of the value added of construction and information and communication,” the statistics office said. “The growth in construction was supported mainly by the repair and reconstruction work of buildings. The construction volume of civil engineering works also increased rapidly.”
The $19 billion economy may grow 1.2 percent this year, according to the European Commission, slowing from the European Union’s fastest growth of 7.6 percent last year, when improved competitiveness and confidence following euro adoption boosted demand for electronics and machinery from neighboring Sweden and Finland. The central bank has said a recession can’t be ruled out if Europe’s debt crisis worsens.
Shipments of goods such as wireless network gear for Stockholm-based Ericsson AB and wind generators for Zurich-based ABB Ltd. rose 10 percent from a year earlier in the fourth quarter after a 32 percent increase in the third. Household spending rose 5 percent and investment increased 34 percent, both little changed from the previous quarter.
Estonia has no outstanding bonds, so investors speculate on its creditworthiness by trading credit-default swaps. Five-year Estonian CDS traded at 120 points yesterday, after declining to a six-month low on March 5, according to data provider CMA. Standard & Poor’s Ratings Services on Jan. 13 affirmed Estonia’s AA- rating, the fourth-highest investment grade and the highest rating in eastern Europe on a par with the Czech Republic.
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