Economic growth will remain solid, but slow to 3.7% in 2018 and 3.2% in 2019 as labour resources become scarcer. Private consumption is projected to strengthen, boosted by personal income tax reductions and wage growth. Investment is projected to continue to support activity. Improved euro area growth will stimulate exports despite increases in unit labour costs.
The fiscal stance is broadly neutral in 2018 and will be mildly expansionary in 2019. While this is appropriate given accommodative euro area monetary policy, fiscal space is available to foster inclusive growth and address societal issues once risks of overheating ease. Measures to support innovative activities in domestic firms and improve access to lifelong education should be prioritised.
Economic Survey of Estonia (survey page)