New Market Report Now Available: Estonia Business Forecast Report Q2 2013

Fast Market Research recommends "Estonia Business Forecast Report Q2 2013" from Business Monitor International, now available

by Bill Thompson

(WireNews+Co) - Boston, MA - 19 February 2013

Core Views - We anticipate Estonia's economic recovery to persevere in 2013 driven primarily by consumer and investment spending. Moreover, a recovery in Estonia's exporting sector will result in a less-negative drag on headline growth than in 2012.

We maintain a positive view towards Estonia's fiscal trajectory. Stronger economic growth, which will boost revenues and help shrink the deficit as a proportion of GDP, will be key to the narrowing shortfall. Meanwhile, public debt is set to increase on the back of eurozone bailout fund contributions. However, Estonia's debt burden will remain well below other EU member states.

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Popular support for Estonia's Reform Party, the majority coalition party, is likely to fall further as a result of an alleged party financing fraud. While the pro-Russian Centre Party will remain popular amongst the ethnically Russian electorate, we see little scope for its inclusion in a potential re-shuffling of the coalition given deep ethnic political divides.

Major Forecast Changes

No major forecast changes since our last quarterly report

Risks To Outlook

As a member of the eurozone, Estonia remains highly exposed to the sovereign debt crisis, an intensification of which would have a deleterious impact on Estonia's macroeconomic outlook.

Partial Table of Contents:

Executive Summary

Core Views

Major Forecast Changes

Risks To Outlook

Chapter 1: Political Outlook

SWOT Analysis

BMI Political Risk Ratings

Domestic Politics

Further Political Dislocations Ahead

- Popular support for Estonia's Reform Party, the majority coalition party, is likely to fall further as a result of an alleged party financing fraud. While the pro-Russian Centre Party will remain popular amongst the ethnically Russian electorate, we see little scope for its inclusion in a potential re-shuffling of the coalition given deep ethnic political divides.

TABLE: POLITICAL OVERVIEW

Chapter 2: Economic Outlook

SWOT Analysis

BMI Economic Risk Ratings

Economic Activity

Relatively Strong Economic Growth To Persist

- We anticipate Estonia's economic recovery to persevere in 2013 when we forecast real GDP growth of 3.3%, up slightly from 3.2% estimated in 2012. Consumer and investment spending will remain mainstays of economic growth this year. Moreover, a recovery in Estonia's exporting sector will result in a less negative drag on headline growth than in 2012.

TABLE: ECONOMIC ACTIVITY

FX Forecast

Euro Downtrend: Temporary Disconnect

- Having rallied into the third quarter following the European Central Bank (ECB)'s pledge to purchase encumbered eurozone sovereign debt (conditional on the target Member State first agreeing to a structural macroeconomic adjustment programme), the euro is now testing key resistance at US$1.3000/EUR. This would ordinarily suggest potential for a more pronounced rally towards US$1.4000-1.4500/EUR. However, we believe that any technical breach US$1.3000/EUR could see the euro drift towards US$1.3500/EUR before paving the way for a fresh round of depreciation.

TABLE: EUROZONE CURRENCY FORECAST

TABLE: FISCAL POLICY

Fiscal Policy

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