Economic outlook, analysis and forecasts

Estonia - Economic forecast summary (June 2015)


Economic growth is projected to strengthen gradually. Strong wage growth will fuel private consumption and investment will recover somewhat. Export growth will pick up only slowly, however, hampered by weak economic growth in some of Estonia’s main trading partners.

The government’s fiscal stance is expansionary, but public debt remains very low. Reducing the high structural surplus would be appropriate to finance medium-term fiscal priorities, including education and infrastructure spending. Lower taxes on labour earnings, in particular on low earnings, would raise growth by stimulating employment. To raise productivity, structural reforms need to focus on improving skills and knowledge transfer to Estonian firms.

The investment-to-GDP ratio declined in recent years, despite robust GDP growth. Uncertainty, in part due to heightened geopolitical tensions, is holding back business investment. Public investment has also weakened as transfers from the European Union have fallen temporarily and projects funded via earlier sales of Kyoto permits are being phased out. More investment to expand access to European transport networks and energy supply facilities would improve medium-term economic growth prospects.

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