OREANDA-NEWS. February 19, 2010. If in the fall SEB Pank held out a forecast of 0.3 percent decline in Estonia's gross domestic product (GDP) for 2010, then in an estimate published the bank predicts 2 percent growth for the economy instead.

"If Estonia joins the eurozone, the economy will grow 5 percent next year," SEB analyst Hardo Pajula said when presenting the fresh forecast.

He added that if Estonia fails to adopt the euro, the economy will remain on a downward path.

As the main reason that could prevent the arrival of the euro, Pajula named the ongoing developments with regard to Greece.

Pajula said that right now, accession to the eurozone is rather a matter of political choice.

Pajula observed that the upgrade in Estonia's economic growth forecast was made at the initiative of Sweden.

"The bank has raised the growth forecasts of all countries of the Baltic Sea region and this holds true also for the forecast concerning Estonia," the analyst explained.

SEB Group on Tuesday published Nordic Outlook, its regular economic survey.

In the survey, it says that even though wages will keep declining, inflation in Estonia is estimated to speed up this year. The annual rate of inflation in Estonia will be 2 percent in 2010 and 4 percent in 2011.

Estonia's unemployment rate is seen to climb to 16.4 percent in 2010 and decline to 12.5 percent in 2011.

Latvia's GDP is forecast to drop 3 percent this year and rise 4 percent in 2011. The economy of Lithuania is seen to grow one percent in 2010 and 4 percent in 2011.

SEB raised the GDP forecasts for all the Baltic countries on improved export outlooks.

"The worst seems to be over in the Baltic countries. Bottoming-out trends that we pointed out in our autumn reports strengthened during the winter. Export prospects have improved further, and Estonian membership of the eurozone in 2011 looks increasingly likely, which is boosting investments," said Mikael Johansson, Baltic and eastern European analyst at SEB Economic Research.

"Meanwhile there is some lingering uncertainty as to whether the three governments will have the stamina to fully implement their painful belt-tightening policies. This risk applies especially to Latvia, which is holding an election this coming autumn," Johansson said.