OREANDA-NEWS. August 14, 2009. According to the flash estimate of Statistics Estonia, the real gross domestic product (GDP) of Estonia decreased by 16.6% in the 2nd quarter of 2009 compared to the same period a year ago. Compared to the previous quarter, the seasonally adjusted real GDP decreased by 3.7% in the 2nd quarter. The rapid decline in foreign trade and slowdown in financial markets have decreased global demand. However, the adverse developments that emerged at the end of the last year are showing some signs of fading, reported the press-centre of Eesti Pank.

Compared to the 1st quarter, production volumes have stabilised over the last months. Although decline in the 2nd quarter was the deepest in year-on-year terms, it has slowed down in quarter-on-quarter comparison. The rapid decline in industrial production volumes at the end of the last year and at the beginning of this year has stopped in monthly comparison. Export volumes have not decreased in the last months and the sharp increase in the number of unemployed recorded at the beginning of the year has slowed down. Industrial sector's and households' expectations have also slightly improved. The slowdown in economic decline may suggest that the recession is bottoming out.

Adverse external developments cause major changes in small open economies. In the first half of the year, the real GDP fell to the level recorded at the beginning of 2005. A rapid decline in economic activity has also occurred in Finland and Sweden - Estonia's main trading partners - where both the volumes of industrial production and foreign trade have fallen at a similar pace. At the same time, the flexibility of markets has supported the economic agents in swiftly adjusting to new conditions by creating good grounds for new growth opportunities.

Decline in economic activity in the 2nd quarter is broadly in line with the spring forecast of Eesti Pank. For the main scenario of the forecast to materialise, the economic environment should slightly improve in the second half of the year compared to the first six months. The first signs of improvement in global economy need further confirmation and both demand on external markets and investor confidence should recover for this development to take place. At the same time, the uncertainty surrounding the potential development of external environment remains high which is why the materialisation of the risk scenario of spring forecast cannot be ruled out in case of possible adverse developments.