UPDATE 1-Estonian economy shrinks more than expected in Q1

Mon May 12, 2014 5:27pm IST

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* GDP down 1.9 pct preliminary in Q1 yr/yr

* First contraction in four years

* Estonian central bank says economy weaker than forecast in Q1 (Updates with comments from analysts and officials)

TALLINN, May 12 (Reuters) - Estonia's economy shrank by 1.9 percent in the first quarter from a year before, its first quarterly contraction since 2010, as trade, logistics and the energy sector all proved weak, the statistics office said on Monday.

The preliminary reading was worse than forecast and followed a 0.3 percent expansion in the final quarter of 2013. Low growth and recession among Estonia's main trading partners Sweden and Finland has dragged on the economy.

"Although our estimate was for a mild recession in the first quarter ... mainly due to a decrease in exports and an increase in the foreign trade deficit, this decline in GDP was a bad surprise," Swedbank Estonia chief economist Tonu Mertsina said.

In seasonally adjusted terms, the economy contracted by 1.2 percent in the first quarter compared with 0.2 percent growth in the fourth quarter of 2013, preliminary figures from the statistics office showed.

Estonia's economy last shrank four years ago, when a first quarter contraction of 3.6 percent in Q1 2010 marked the final stage of a deep recession. Estonia enjoyed buoyant growth until the start of 2013 and has expanded only slowly since then.

The statistics office said on Monday that transport and its associated warehousing sector had been weak in the first quarter. The relatively warm winter also reduced local energy production while imports of cheaper Nordic power increased.

Estonia's banking sector is more than 90 percent owned by the Nordic banking groups like SEB, Swedbank and Nordea and the small, open euro zone economy is strongly affected by global economic trends.

The finance ministry said in April it expected economic growth of 2.0 percent this year.

(Reporting by David Mardiste; Editing by Catherine Evans)

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