Estonia falls into technical recession

Country:  Estonia

27 August 2008

Estonia is the first of the Baltic States to technically fall into recession, according to official data compiled by Statistics Estonia.

The research shows that the country’s economy contracted by a seasonally adjusted 0.9% in Q2 of this year, following a 0.5% fall in Q1. Furthermore, Estonian’s GDP is now falling at an annual rate of 1.4%, according to Capital Economics.

Capital Economics projects that Latvia will soon join Estonia in recession. "The Latvian economy grew by just 0.2% year-on-year in Q2. This appears consistent with a contraction in seasonally adjusted GDP of 1.5%, the first quarterly fall since 1998. But it’s only a matter of time before Latvia joins Estonia in recession," the company said. 

The economic group blames the bursting of the Baltic property market bubble and a sharp decrease in consumer spending, for the financial meltdown.

The latest research from Knight Frank shows that average prices of property for sale in Estonia and Latvia depreciated by nearly 11% and 6% respectively in Q1 2008. 

Lithuania remains the most stable Baltic property market, with property prices remaining stable.