Riga/Tallinn/Vilnius  - Economists are predicting doom and gloom for the Baltic states throughout 2009 and beyond. with jobless figures rising in Estonia, Latvia and Lithuania and swingeing public spending cuts already starting to bite.

According to Neil Shearing, a Baltic expert with London-based Capital Economics, the recession in the Baltics looks set to deepen. "We now expect output to contract by 5 per cent next year and by up to 1.5 per cent in 2010," he said.

However, after surviving 50 years of Soviet occupation, which they only threw off in 1991, Balts have a longstanding reputation for stoicism in difficult circumstances.

That stoicism is certainly in evidence at the traditional Christmas market in the Latvian capital, Riga. It may be smaller than in previous years and the number of foreign tourists sampling the potent local liqueur "Rigas balzams" and traditional Latvian "piparkukas" or gingerbread has been reduced by the effects of the global credit crunch, but stallholders remain optimistic.

Bookseller Andris told Deutsche Presse-Agentur dpa: "We are not so affected by the smaller number of tourists because we sell mainly to locals. We've kept our prices about level with last year even though we have had twelve months of high inflation. But the price of our Russian-language editions has risen because of increases from our suppliers in Russia."

However, Andris was worried about proposed changes to Latvia's tax laws that could increase the amount of duty paid on books in 2009.

Fantasy titles and romances are the strongest sellers at the moment, he said. "In tough times, of course, people enjoy to fantasize and take themselves to another place. In that respect books are still very good value, cheaper than a flight to Italy," he said.

Among Balts themselves, Estonians have a reputation as the biggest pessimists, and true to form, sentiment seems to have dipped more sharply in the capital, Tallinn, than in Riga or Vilnius.

Even Anna Lepp, an irrepressible young local IT entrepreneur has noticed the difference.

"The general atmosphere in Tallinn has become cooler. The relations between the Baltic markets have also cooled. Media channels show a lot of negative things and people are much more pessimistic. People have started to study everything more carefully in order to make the right decisions. Having or getting income is a serious business victory today," she said.

She does see plus points as well, though. "This situation brings us some positive changes: local markets will become clear, and unreliable companies will disappear in the nearest future," she predicted.

Some Lithuanians are even in party mood as 2009 approaches. Not only has the country's economy still been evading the recession that has already hit neighbouring Estonia and Latvia. But the country is also in the midst of final preparations as Vilnius assumes the role as European Capital of Culture - along with the Austrian city of Linz - next year.

Festivities get under way on New Year's Eve when a spectacular firework display designed by German artist Gert Hof launches a year-long program of 900 events.

"Everyone is very excited," Vilnius 2009 spokesperson Vilma Janulyte told dpa. "Lithuanian people are proud Vilnius will become the European Capital of Culture in 2009 and associate this project with improvements in the city, new or renovated cultural sites and a better awareness of the name of Lithuania worldwide."

"It's the first time a capital of culture has been located so far east, so we think we will be able to add a bit of Eastern spice compared to what Western European cities have done in the past!" she said.

Though the economic slump has meant the total budget for Vilnius 2009 has been cut by 12 per cent, Janulyte denied it would have any effect. The downturn might even encourage more people to participate, she suggested: "After all, two thirds of the events are free, so you don't even need any money to enjoy it." (dpa)