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Wednesday, February 13, 2008

Sharp Decline in Q4 2007 Estonia GDP Growth

Estonia's economy in the fourth quarter certainly grew at its slowest pace in eight years in Q4 as both investment and consumer spending drpooed dramatically. At annual rate (ie total economic growth over Q4 2006) Estonia's GDP grew at 4.5 percent, down from 6.4 percent in the third quarter, according to the Tallinn-based statistics office today. As can be seen in the chart, the slowdown is now evident and significant.

Well, nothing wrong with that people may say. 11% growth was obviously too high, so 4.5% may be a positive improvement. The thing is the Estonian economy is unlikely simply to reduce speed to 4.5% and stay there. If we look at growth quarter on quarter, and on a seasonally adjusted basis, the economy grew by 0.6% in the 4th quarter over the third. That's an annualised rate of just 2.4% and dropping, as we can see from the chart.

So this slowdown isn't suddenly going to come to a halt. At some point it will "bottom out", but we aren't there yet, and may not be for some few more quarters. When we actually get to the end of the drop we will be able to see the extent of the damage, but at the present time all I can say is that there doesn't seem to be anything "soft" about this landing at all.

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