Swedbank Economic Outlook Update January 2010
Estonia
* Joining the European Economic and Monetary Union is becoming increasingly more likely for Estonia. We anticipate that the criterion for budget balance will be met for 2009, and that a decision to join the euro area will be made in May this year.
* Euro adoption is expected to spur investments in the Estonian economy. Already, improved global conditions are stimulating Estonian exports. The main risk is a postponement of the euro adoption.
Latvia
* Exports have started to recover, but many weaknesses remain. Labour market adjustments have been rapid, and the unemployment rate is expected to reach 23% before declining.
* The main risk to the outlook is that domestic structural reforms stall. Cost cutting is necessary to improve competitiveness in the private sector, and fiscal consolidation needs to continue to preserve sustainability.
Maris Lauri
Chief Economist
Research Department
Swedbank AS
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