(Bloomberg) Estonia’s economy struggled to break out of the European Union’s most sustained contraction as a drop in trade with the Nordic region and an energy shock spurred by Russia’s war in Ukraine take a toll. Most Read from BloombergSaudi Arabia Offers Iran Investment to Blunt Gaza WarCharlie Munger, Who Helped Buffett Build Berkshire, Dies at 99Henry Kissinger, Secretary of State in 1970s Crises, Dies at 100Bill Ackman Bets Fed Will Cut Interest Rates as Soon as First QuarterBond Yields
Bank of Estonia (Eesti Pank) estimated that the combination of the continued state budget deficit along with rising interest rates, could increase interest payments on government loans by several hundred million euros a year within the next four to five years. Around €100 million has been earmarked from next year's budget to cover loan servicing costs.
Domestic consumers have started to utilize their savings in order to both maintain consumption levels and keep up with inflation, which in Estonia has been running at well over 20 percent since May and is the highest rate in Europe, according to data from the Bank of Estonia.
While the Bank of Estonia (Eesti Pank) forecast somewhat more trying economic times in the upcoming autumn and winter, in nominal terms the economy will continue to grow, due to increasing wages and prices, the central bank's director, Madis Müller, said, and no crash is on the way.
The current economic downturn is atypical in that it is primarily supply-side-related, and has no obvious light at the end of the tunnel, Bank of Estonia (Eesti Pank) chief Madis Müller said Tuesday.