TALLINN: The economy of small euro zone member Estonia will grow 3.0 percent this year and its budget deficit will be 0.5 percent of expected gross domestic product (GDP), the Finance Ministry said in a new economic outlook on Thursday.

The country, which joined the euro zone in 2011 and has among the best public finances in Europe, has been supported by relatively strong domestic demand even as the manufacturing and export sector has been hit by the crisis in some euro zone states.

The 2013 and 2014 GDP forecast - at 3.6 percent - were unchanged from the previous outlook issued in September last year.

The expected nominal public sector budget deficit this year, at 0.5 percent of GDP, is slightly lower than the 0.6 percent deficit previously forecast.

However, the ministry has scrapped its hopes for budget surplus of 0.1 percent of GDP in 2014 and is now saying it expects a deficit of 0.1 percent of output.

Inflation is expected to stay above the ECB's target of close to, but less than 2 percent, with prices expected to increase by 3.4 percent this year.