TALLINN: Euro zone member Estonia's gross domestic product jumped by 8 percent year-on-year in the first quarter of 2011, the fastest growth in four years and well above forecasts as exports surged.
On a quarter-to-quarter, seasonally-adjusted basis, the economy grew 2.1 percent, compared with 2.3 percent growth in the fourth quarter of 2010.
The finance ministry said the first quarter data indicated Estonia's economy could grow 5 percent this year although the central bank warned that export growth would slow in the second half and domestic demand needed to pick up.
A Reuters poll had forecast first quarter year-on-year growth of 6.1 percent.
The 8 percent expansion was the fastest growth since the first quarter of 2007.
"It definitely surprised on the upside," said Nordea Markets' Helsinki-based analyst Annika Lindblad.
"Although growth was higher than expected, the developments in the economy seem to be pretty much in line with expectations, with export growth still the main driver. Thus exports continued to boost especially the manufacturing sector," Lindblad said in a research note.
In the fourth quarter of 2010, GDP rose 6.7 percent year-on-year.
Growth of value-added manufacturing "contributed to GDP the most," the statistics office said in a statement, citing production of radio, TV and communication equipment and fabricated metal products.
The office said that, according to preliminary data, exports rose 53 percent year-on-year in real terms in the first quarter.
"The first quarter's preliminary economic results and numbers of export orders gives the hope that the finance ministry's spring economic forecasts' positive risk scenario is realised and Estonian economy could grow by around 5 percent this year,"the finance ministry said.
However, the Estonian central bank warned that export growth is expected to slow in second half of there is a need for domestic demand to recover.
"The export slowdown will continue and this is reflected in the growth in numbers. Thereafter it is increasingly important to see a recovery in domestic demand," the bank said in a statement.
The bank added external factors such as rising commodity prices remain a risk for economic growth.
The office will release full details on first quarter GDP on June 9.
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