Analytics, Economics, Estonia, EU – Baltic States, GDP

SEB forecasts Estonia’s 2012 economic growth to be 4.5%.

The bank kept the consumer price index increase estimate unchanged at 4% this year and 5% next year.

The unemployment rate should fall this year to 12% and in 2012 to 11%.

Lithuania's growth will surge to 4.0 and 4.5% in 2011 and 2012, writes SEB in its March 2011 issue of Eastern European Outlook. Exports will continue to drive growth, which will nevertheless become more broad-based as fiscal tightening softens this year. Emigration and growing labour shortages will hamper the upturn, the bank said.

According to SEB, economic conditions in Eastern Europe (including "Central Europe") will strengthen in 2011-2012, although fiscal policies will be tightened moderately in many countries and global growth will level out. Strong, competitive exports will remain a key driving force this year.

The increase in broad inflation measures will culminate this year, except that in Estonia and Lithuania inflation will continue to accelerate in 2012, the SEB bank said.

"Painful austerity policies in the Baltics will soon fade away. In our assessment, these countries' internal devaluations, including sharp pay cuts, are over. Private wages and salaries have been increasing again since late 2010. Latvia's budget tightening will continue this year, but Lithuania's fiscal policy will be more neutral. In Estonia we expect fiscal policy to be expansionary. Budgetary challenges still remain, however. Latvia and Lithuania are still running large budget deficits, and their governments' ambition to bring the deficit down to a maximum of 3% of GDP in 2012 to prepare the way for euro zone accession in 2014 is in danger. Some further tightening may be required in Lithuania," says Mikael Johansson, Head of Eastern Europe Research and Chief Editor of Eastern European Outlook.