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Estonia’s Central Bank Cuts 2013 Economic Forecasts on Exports

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June 12 (Bloomberg) -- Estonia’s central bank cut its economic-growth and inflation forecasts for 2013, citing weaker-than-expected export demand from Nordic countries and Russia and falling oil prices.

Gross domestic product will expand 2 percent, less than December’s 3 percent projection, accelerating to 4.2 percent next year, the bank, based in the capital, Tallinn, said today in an e-mailed statement. Inflation will average 3 percent, compared with the previous 3.6 percent forecast, slowing to 2.5 percent in 2014, the bank predicted.

“The recovery of external demand remains uncertain, which may threaten the export sector,” the bank said. “Structural unemployment and labor shortage could cause excessive wage pressure, spur inflation and thereby harm export competitiveness.”

Estonia has grown at the fastest pace in the euro area for the last two years, expanding 8.3 percent and 3.2 percent. The $22 billion Baltic economy is suffering from the delayed impact of Europe’s debt crisis as demand for its electronics and metals in Sweden and Finland weakens, according to the central bank.

Fitch Ratings on May 30 affirmed Estonia’s credit grade at A+, the fifth-highest investment grade, citing an economic recovery and fiscal improvement since euro adoption in 2011. Estonia was one of only three euro-area members last year meeting European Union limits on public finances, together with Finland and Luxembourg, Eurostat data show.

The government will meet its goal of balancing next year’s budget after a deficit of 0.3 percent of GDP in 2013, the central bank said. The unemployment rate will fall to 9.2 percent this year from 10.2 percent in 2012, the bank predicted.

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

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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