Tallinn - The Estonian economy contracted by nearly one- tenth in the final quarter of 2008, according to a provisional estimate released Friday by the small Baltic state's official statistics bureau, Eesti Statistika.

"Gross domestic product (GDP) decreased by 9.4 per cent in Estonia in the 4th quarter of 2008 compared to the same quarter in the previous year," Eesti Statistika said.

The news confirmed that the Estonian economy shrank for three consecutive quarters after the former "Baltic Tiger" became the European Union's first member state to slip into recession in 2008.

"A steep decrease in... the economic activities of the industrial sector, especially of manufacturing, had a substantial impact on the decrease of GDP.

"The decrease in manufacturing was caused by a continually small domestic demand and by virtue of that, a decrease in orders," Eesti Statistika outlined.

Figures for the third quarter showed a 3.5 per cent drop.

More worrying than the fact that the economy continues to contract was the sheer scale of the drop, which was far steeper than most economists had predicted.

Danske Bank Baltic analyst Violeta Klyviene told Deutsche Presse- Agentur dpa the figures were far worse than her expectation of a 4.6 per cent drop.

"It seems that our low-case scenario might be materialising," she said.

"This might mean that the recession will continue for longer than expected into next year. Our analysts have noted some strong similarities with the Asian crisis of 1997-98," she added. (dpa)