Macroeconomic Forecast Estonia

A recession and the global banking sector crisis has significantly increased downside pressures on the kroon forcing the Bank of Estonia to step up interventions to maintain the currency's peg against the euro. This has been reflected in the level of reserve holdings, with the figure falling to US$3.64bn (EUR2.53bn) in September, a 12.9% decline from the previous month. We expect Estonia's foreign exchange reserves to fall further in the short term and have revised downward our end-2008 forecast to US$3.3bn (EUR2.2bn), just 0.2% higher than the end-2007 figure.

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