Baltic economic outlook
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Timo Hirvonen Senior Economist
18.4.2016
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Weak development in world trade –
consumption and services are growing
3
Mixed picture in the global economy
Russia’s recession
eases in 2017
Moderate
growth
continues in the
USA
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Recession
continues in
Brazil
Moderate
growth in
Europe
helped by
consumption
South Africa
suffers from
the fall in
commodity
prices
China’s
growth slows
down and
relies more
on services
Strong
growth in
India
4
ECB monetary policy ultraexpansionary
ECB's expanded asset purchase programme
1800
Bn. euros
Monthly purchases 80
bn. euros from April
2016
New target
1600
1400
1200
Old target
1000
800
600
Government bonds
400
Covered bonds
200
0
3-2015
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Source: Macrobond and OP
Asset-backed securities
9-2015
3-2016
9-2016
3-2017
5
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Calm before summer storm?
6
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Baltic countries exports to Russia have declined
7
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Recession in Russia impacts Baltic countries’
exports
8
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Economic growth picture improving
9
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Unemployment continues to decline
10
Economic forecasts
Baltic countries
2014
2015f
2016f
2017f
2,9
2,4
3,0
1,3
2,6
1,5
2,0
3,0
2,5
3,0
3,2
3,0
7,4
10,8
10,7
6,1
9,9
9,1
6,0
9,5
8,5
7,0
9,0
8,0
GDP change, %
Estonia
Latvia
Lithuania
Unemployment rate, %
Estonia
Latvia
Lithuania
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Sources: IMF, Eurostat and OP Financial Group
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Better times ahead in the Baltics

Weaker export development slowed down economic growth in the Baltic countries in 2015.
 Contracting Russian economy was a drag on exports.
 On the back of low inflation and higher employment private consumption was the main driver for
economic growth.

Estonia’ s GDP growth will strengthen in 2016.
 Low inflation and higher employment will support households’ consumption, the main driver for
economic growth. Investment will pick up more strongly in 2017.
 Euro area economic growth will support Estonian exports. Russian economy will remain weak.
Higher economic growth in Latvia in 2016.
 Also in Latvia private consumption leads the way for GDP growth. Inflation remains low and
employment continues to increase.
 EU funding programme will spur investments. Export sector has found new markets and better external
demand will benefit exports.
Domestic demand the key driver in Lithuania.
 GDP growth is supported by domestic demand. Good employment development and low inflation will
keep households’ consumption up and running.
 Low interest rates and EU-funding will increase investments. Exports to Russia will remain weak, but
exports to new markets will strengthen.

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
Thank you!
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Twitter: @HirvonenTimo
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Recent improvement in confidence indicators in
Estonia
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Diverging development in confidence indicators
in Latvia
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Minor improvements in confidence indicators in
Lithuania