Bigbank cuts Estonia's economic growth forecast to 1.7 percent

Bigbank's chief economist Raul Eamets has cut Estonia's economic growth forecast for this year from 2.3 percent to 1.7 percent. At the same time, the bank has raised its inflation expectation from 3.2 percent to 5 percent. By year-end, Eamets forecasts the 6-month Euribor at 2.65 percent.

Bigbank unveiled an updated economic forecast package today, in which the bank's chief economist Raul Eamets has significantly downgraded Estonia's economic growth outlook for this year. According to the new forecast, Estonia's GDP will grow by just 1.7 percent in 2026, while at the start of the year growth of 2.3 percent was expected.

The inflation picture has also become notably more pessimistic. While at the beginning of the year Bigbank forecast consumer price inflation at 3.2 percent, it now expects price increases of 5 percent-roughly twice as fast as originally anticipated.

Regarding Euribor, Eamets forecasts that the 6-month Euribor, which forms the basis for most home loans taken in Estonia, will fall to 2.65 percent by year-end. This will provide some relief to households on loan repayments, but high inflation may largely offset this positive effect.