TALLINN, Feb 13 (Reuters) - The economy of the Baltic state of Estonia shrank by a much worse than expected 9.4 percent in the final quarter of last year, its worst performance ever, the statistics office said on Friday.
The figures confirmed the extent of the downturn in the once booming European Union country and put it just behind neighbour Latvia, where gross domestic product (GDP) fell 10.5 percent in the final quarter of 2008.
"This is the first time we have seen a fall so great as this," statistics office official Tonu Mertsina told Reuters. In the third quarter, the economy contracted 3.5 percent.
He said the data meant that the drop in GDP for the whole of 2008 was 3.6 percent, a sharp reversal from growth of 6.3 percent in 2007.
Analysts in a Reuters survey had expected a drop of 5.7 percent in GDP, according to the median forecast. The biggest drop expected in the survey was 8.5 percent.
Compared to the third quarter, the seasonally and working-day adjusted GDP decreased by 4.2 percent.
"Value added decreased in the majority of economic activities," the statistics office said in a statement.
"A steep decrease in the value added of the economic activities of industrial sector, especially of manufacturing, had a substantial impact on the decrease of the GDP," it said, blaming a drop in domestic demand and a fall in orders.
Export of manufacturing production also decreased while a drop in the value added of financial intermediation, which began in the second quarter, accelerated.
Faced with tumbling tax receipts due to the slowdown, the government has already had to lop 8 billion kroons ($652 million) off spending planned in the 2009 budget. (Reporting by David Mardiste; Writing by Patrick Lannin; Editing by Kim Coghill)