Estonia inflation hits 10-year high as economy slows

Rising inflation, coupled with slower growth, is increasingly clouding economic prospects for the small nation, once known as one of the 'Baltic Tigers' along with Latvia and Lithuania.

Estonia's consumer prices rose the most since a 12.6-per-cent spike in April 1998, the government's statistics office said. Slowing domestic demand, rapid wage growth and a cooling real estate market have forced Estonia's government to cut its budget, delay plans to join euro and lower its 2008 economic growth forecast. Estonia's expansion slowed to 7 per cent last year from more than 11 per cent in 2006.

A further slowdown is expected this year, partly due to falling retail sales. A Danske Bank report forecast that Estonia's economy will grow by only 2.5 per cent in 2008. Real estate transactions declined to 2004 levels last year and prices dropped by 10-15 per cent year-on-year, the report said.

Growth is expected to slow in most eastern European countries from the Baltics to Bulgaria under the impact of tighter credit, central- bank moves to fight surging inflation and the ripple effect of a weaker global economy. Price hikes of food and other raw materials in the world market have pushed down the economic forecast. Be the first to comment!

Source http://monstersandcritics.com/news/business/news/article_140~

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