Estonia's Economy Expected To Shrink 12.3 Pct

Estonia's main trading partners are Finland and Sweden, which also have downgraded their economic forecasts due to the financial crisis.

While the bank's base scenario predicted a 12.3 percent drop in GDP, it said a quick recovery among trading partners could limit the drop to 8.4 percent — which is in line with a Finance Ministry forecast last month.

In the worst case scenario, the country of 1.3 million would see economic activity shrink by as much as 15 percent in what is considered the most severe recession since independence in 1991.

The bank on Wednesday also revised its annual inflation forecast for 2009 to 0.5 percent from 2 percent.