OREANDA-NEWS. August 29, 2012. This year, the Estonian economy will grow 3% and in the coming years the growth will pick up slightly. According to Swedbank’s fresh economic forecast for this year, we expect a slightly stronger growth of exports owing to, above all, the improved growth prospects of the entire region, including those of Estonia's main export partners, reported the press-centre of Swedbank.

According to Kristjan Tamla, the Head of the Analysis Department of Swedbank’s Baltic Investment Centre, the bank raised its start-of-the-year forecast by 0.3%. “The main reason lies in better-than-expected results in internal and external demand in the first half of the year. Internal demand also seems to be less influenced by what is happening in the eurozone – the first half of the year refers to strong growth in investments as well as consumption,” notes Tamla.

“The consumption expenses of households have shown stronger growth than we expected in April, in spite of the risen uncertainty in euro area states. Private consumption continues to be fuelled by favourable developments in the labour market – both wages as well as employment are expected to rise. The strong growth of consumer prices experienced so far will slow down in the near future and it will allow households to feel slightly more certain about coping in the future and this will, in turn, be reflected in the rising courage to consume,” says Tamla.
According to Tamla, the Estonian economy remains exposed to events taking place in the world economy, especially in euro area states, as well as a stronger-than-expected rise in commodity prices. “The latter has a direct impact on the Estonian price level, which may mean that inflation will slow down less than expected. High structural unemployment and lacking domestic mobility of labour remain the main domestic factors,” adds Tamla.

“A deficit of qualified labour may result in further price pressures as early as next year. The number of the long-term unemployed remains high and increases the number of households that are struggling to cover their primary needs, thereby increasing the risk of bequeathing poverty – the generations to come will have it difficult to escape poverty," Tamla explains.
The development of the world economy in recent months can be characterised by mixed signals, because in spite of the risen feeling of certainty and higher production volumes in manufacturing, the economic growth is still slow and the unemployment rate is high.

In addition to economic factors, factors whose change and impact are difficult to foresee, i.e. political decisions and the reaction to them (psychological factors, e.g. social disruptions, investors' decisions, financial market volatility, etc.) are about to become increasingly important. The growth expectations of Nordic economies have, however, risen considerably, while households, companies and governments of Southern economies are facing difficult times. The future economic development of other states are characterised by the much-discussed cuts and a continued expansive monetary policy.