Dec. 14 (Bloomberg) -- Estonia’s central bank cut its forecast for economic growth next year and said a recession can’t be ruled out if Europe’s sovereign debt crisis worsens.
Gross domestic product will probably increase 1.9 percent next year, compared with the previous forecast of 4.2 percent in June, the Tallinn-based Eesti Pank said in an e-mail today. It reduced the 2013 forecast to 3.6 percent from 4.2 percent.
“Estonian economic growth will decelerate sharply in 2012,” the bank said. “If the external situation deteriorates even more, a recession cannot be ruled out.”
Estonia, the first former Soviet republic to adopt the euro when it made the switch in January, has been the fastest growing economy in the 27-member European Union this year. The $19 billion economy has been driven by demand in neighboring Sweden and Finland for its electronics and machinery exports.
The central bank raised its 2011 growth forecast to 7.9 percent from 6.3 percent seen in June.
Average annual inflation will slow to 2.8 percent next year from 5.1 percent this year, the bank said. It previously forecast 2001 inflation at 4.7 percent this year and 2012 price growth at 2.5 percent.
--Editors: Balazs Penz, James M. Gomez
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