By Liis Kangsepp

TALLINN--Estonia cut its growth forecasts for the second time in six months Monday, citing an even bleaker outlook for important export markets, such as Finland, Latvia and Russia.

Finance Minister Jurgen Ligi said that growth would be 0.5% in 2014 compared with the 2% expected in April and the 3.5% expected last autumn. He also cut his forecast for 2015 to 2.5% from 3.5%.

"It is clear that besides what is happening in Russia, our closest neighbors Finland and Latvia--and the European Union in general--are also lowering their expectations," Mr. Ligi said in an interview.

Finland is Estonia's second biggest export market after Sweden and takes 16% of the country's exports, while Latvia comes third with 11%. Russia is fourth on the list, taking 10%, official data showed earlier this month.

While Sweden's economy is still posting steady growth, Finland is mired in recession and the government is mulling further spending cuts and tax hikes to steady public finances.

Meanwhile, the Russian economy has weakened as capital has fled the country amid increased tension with Europe and the U.S. over Russia's support for separatists in Ukraine.

Europe and the U.S. have imposed economic sanctions against Russia and Moscow has responded by banning the import of some foodstuffs from Europe.

Exports to Russia have fallen sharply, Estonia's statistics agency said early August.

"Russia is a lost market because Russia itself has been busy destroying its demand, ability to import and its currency," Mr. Ligi said. "Our prognosis is a... reminder: The biggest victims in this situation are not Russia's partners but Russia."

Write to Liis Kangsepp at liis.kangsepp@wsj.com