Analytics, Economics, Estonia

The economic downfall in the fourth quarter of 2008 was sharp – certainly faster than in the third quarter. That is proved by both fallen retail sales and industrial production.

"The demand has vanished in every front, domestic and foreign, and is continuously on its way down. The state budget is in difficulties and will get in more trouble this year. I think the state should start developing negative budget fast," the analyst said.

November brought the greatest annual fall in retail sales, but such fall of industrial production probably means lack of export orders.

The fall has hit all industrial sectors, except for communication devices, but that might be hit soon as well.

"The situation is continuously very bad and keeps worsening at least first half of the year," Eier said.

That means people have less job and smaller salaries, some people will be freed from duties. That all is reflected in the state's tax revenues – smaller amount of taxes on consumption, transactions and profit, also the taxes on salaries will be smaller.

By the end of the year the economy's bad situation was reflected in the tax revenues – the state collected less income tax in October and November than last year, 17% less value-added tax (VAT) than a year ago and also less excise duties.