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Estonia Business Forecast Report Q1 2010Published by: Business Monitor International Published: Oct. 30, 2009 - 51 Pages Table of Contents
AbstractOur core macroeconomic and political risk scenario for Estonia remains little changed, with thecountry expected to remain in recession through to 2010. Despite signs that western Europe islikely to recover faster than originally expected, Estonia and its Baltic peers will not be in a positionto take significant advantage of improved external conditions. With limited export sectors, the coreunderlying factor driving the economy will continue to be domestic deleveraging and the resultingsharp contraction in domestic demand.T he success of Estonian Prime Minister Andrus Ansip’s minority coalition government in passingfurther expenditure cuts within its 2009 budget bodes well for future political stability. Our core viewis that broad political consensus towards accelerated euro adoption should provide an anchor foreconomic policy and help prevent any major parliamentary ructions through 2010. That said, withthe government having the official backing of only a minority in parliament, we caution that risks ofa serious political crisis remain. Indeed, we still do not rule out the possibility of early elections. While we hold to our core view that the recession in Estonia reached its trough in the secondquarter, we see little scope for a recovery to gain pace in H209. Indeed, leading indicator datasuggest that Estonia will continue to experience a double-digit contraction in Q309; and a returnto positive growth is not expected until H210. We hold to our forecast for real GDP to decline by13.2% in 2009 and by 1.2% in 2010. T he Estonian government gave formal approval to sell its 27% minority stake in telecoms companyEesti Telekom on September 24 2009. Swedish company Teliasonera will pay EEK93/share forthe government’s holding and also receive an extraordinary dividend in 2009. The government isexpected to net EEK4bn from the deal, which will be utilised to help narrow the borrowing requirementand reduce the country’s gaping budget deficit. The decision marks a shift in policy by thegovernment, which had previously hesitated to privatise its stake in the fixed-line operator. Webelieve the Eesti Telekom deal could just be the beginning of further privatisations, as the governmentfocuses on lowering its fiscal shortfall to within 3% of GDP to meet the Maastricht requirementsfor euro entry. This could go some way to rejuvenating foreign investor interest in the economy. Get Full Details About This Report >> |
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