Gross domestic product rose a revised annual 0.1 percent in the first three months of 2008, compared with a preliminary 0.4 percent reported on May 14 and 10.1 percent annual growth rate a year earlier, according to the Tallinn-based Statistics Office said on today.
Adjusted seasonally and for working days, the economy shrank 0.5 percent from the fourth quarter.
Estonian economic growth, which was the fastest in the European Union in the second quarter of 2006, is now the slowest and may well already be in recession. Accelerating inflation, slumping consumer confidence and tighter lending have all helped stall retail sales, squeezed manufacturers and cooled the housing market after a spending and investment boom which really got started after Estonia joined the EU in 2004.
``A hard landing scenario has already materialized in the Estonian economy,'' Lars Christensen and Violeta Klyviene, economists at Danske Bank A/S,said ``We expect a negative growth performance in 2008 and only marginal improvement in the next year.''
The International Monetary Fund said last month that Estonia's economy may contract this year and the government will have to ``significantly'' cut spending in coming years balance the budget.
Consumer spending shrank 0.4 percent in Q1 2008 from a year earlier, led by lower spending on transport, clothing and alcohol and tobacco, the statistics office said. Exports fell 5.4 percent, mainly due to a decline in Russian oil shipments and related sea and railway cargo transport services.
Russian oil shipments through Estonia have fallen by a third since May 2007 after a Soviet war memorial was removed from Tallinn's city center, sparking protests from some members of Estonia's Russian-speaking minority and the Russian government.