Estonia’s economy expanded a mind-boggling 12% from April to July this year, fuelled by robust domestic consumption and strong growth in exports, the Statistical Office reported on 4 September.

The data is based on preliminary information, and surpassed analysts’ expectations. Estonia’s white-hot economy forced the Finance Ministry to adjust its annual growth figures last month to 9.6% from the 8.2% originally forecast earlier this year.

Anne Karik-Uustalu, an analyst with Sampo Pank, said the growth was increasingly reliant on strong expansion in the construction and service sectors, while industrial growth figures were somewhat weaker, and she expects the economy to grow by around 10% this year.

However, the downside of such strong economic growth is that Estonia is now very unlikely to join the Euro in 2008 because of rising inflation. In the Spring, the Ministry of Finance predicted the annual rise in the consumer price index would be 3.7%, but it has now revised that figure to 4.5% this year and 3.9% in 2007.