Tallinn - The Estonian central bank denied press reports Friday that it had despatched a senior figure abroad to damp down rumours about the devaluation of the national currency, the kroon.

Daily newspaper Postimees reported that Jaan Mannik, chairman of the central bank's supervisory board, had gone to Sweden in a bid to calm jittery foreign investors.

However, central bank spokesperson Ingrid Mitt told Deutsche Presse-Agentur dpa: "This was not the reason. These meetings with economists and analysts at different institutions take place regularly."

Devaluation had been covered along with a range of other subjects, including Estonia's general economic outlook, during talks with investment firm Evli, she said.

"Sometimes there are rumours about devaluation and speculation in the press, but it is one of our duties to explain things, even when there is no reason for such talk," Mitt explained.

The central bank's position remains that devaluation is not a possibility, she added.

The three Baltic states of Estonia, Latvia and Lithuania periodically become the targets of devaluation rumours, yet governments and central bankers in all three countries have consistently said such action would be counterproductive.

While devaluation would increase the exportability of Baltic products, it would also cause defaults among local borrowers with euro-denominated mortgages.

Even more significantly, it would also scotch hopes of adoption of the euro, which Estonia aims to achieve in 2011.

On January 27 Estonian Prime Minister Andrus Ansip said: "I'm convinced the major challenge will be the challenge of adopting the euro."

"Investors need trust and the euro gives them that."

But the Baltics face huge challenges in the coming months according to an outlook published Friday by the region's biggest financial force, Swedbank.

The Latvian economy will contract by 10 per cent in 2009, Estonia's by 7 per cent and Lithuania's by 6 per cent, the report says.

"Even the year 2010 will not bring positive growth, albeit the year-end growth rates may turn positive," said Swedbank analyst Maris Lauri.

In an effort to tackle the sharp economic downturn, the Estonian government is working on an amended austerity budget that aims to save around 660 million dollars. (dpa)