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CORRECTED - UPDATE 1-Estonia slides further into recession in Q3

Published 11/13/2008, 05:25 AM
SEBF
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(Corrects day to Thursday)

(Adds analysts, background)

TALLINN, Nov 13 (Reuters) - Estonia's gross product (GDP) slid a further 3.3 percent in the third quarter, data showed on Thursday, pushing the country deeper into a recession from which analysts saw little relief soon.

The former high flying Baltic state is suffering from a sharp decline in consumer spending as the credit crunch has hit it. Its GDP fell 1.1 percent in the second quarter. The downturn has come after two years of strong growth.

"According to preliminary estimates, the decrease in the value added of manufacturing as an economic activity had the biggest influence on GDP," the statistics office said.

"Our forecast for this year is -1.5 percent (GDP), but it looks like the economy is on track for -2.0," said Ruta Eier, macro analyst with SEB.

"We see next year negative as well and forecast growth to be minus 2.2 percent in 2009," she added. That would come after 7 percent growth in 2007 and 10 percent in 2006.

On a seasonally adjusted basis, the quarter-on-quarter GDP fall was 1.0 percent, bringing three straight quarters of decline. The median third quarter forecast in a Reuters survey of 6 analysts was for a 2.5 percent fall in GDP year-on-year.

"The decrease in the value added of manufacturing was caused by low domestic demand and by virtue of that, a decrease in orders," it added in a statement.

Estonia's economy expanded rapidly in recent years due to surging consumer demand, fed by easy credit from Nordic banks.

The lines of credit have now dried up as the global credit crunch hit and inflation is just falling from double digits.

One brighter spot noted by the statistics office was that industrial production rose in the third quarter in export-oriented branches, including in the manufacture of metal products, chemical products, and electrical machinery. (Reporting by David Mardiste, editing by Mike Peacock and Andy Bruce)

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