Late last month, I made a big to-do about the Baltics becoming the next Argentina. Well, part of that mess is unraveling as we speak. Estonia is in recession and Latvia is headed for recession.
Read my translation of a Dagens Nyheter article from Sweden. The Riksbank, Sweden’s Central Bank, has reason to worry about Swedish banking exposure to the Baltics and its effect as a drag on the Swedish economy. SEB and Swedbank have the most exposure.
Estonia: another EU country in recession
More and more countries are reporting a falling economy. Estonia is the second European country which has entered a recession.
Earlier, Denmark reported a negative GDP development. On Wednesday, it was Estonia’s turn. GDP declined by 1.4 percent in the second quarter compared with the same period last year.
There will be negative numbers even in the third and fourth quarter. Yes, we are in a recession, “said SEB economist Box Eire about the Estonian economy.
SEB, along with Swedbank, has a lot of banking activity in the Baltic countries. The GDP figure, which was weaker than expected, put pressure on the two banks’ stock prices, which were down over four percent each.
Even the Latvian economy is at a standstill. Year-on-year growth in the second quarter came in at +0.2 percent.
Notice that this is second quarter data and Q3-Q4 data should be even weaker. Writedowns for Swedish banks are coming.
For my U.S. and UK readers who could give a t%ss about the Baltics, know that these downturns are all inter-related. With the likes of Japan, South Africa, and the Baltics all separatly hitting the wall, it is obvious that there wil be some negative feedback for economies like the U.S. and the UK as well.
Source
Estland andra EU-landet i recession – Dagens Nyheter