Analytics, Economics, Estonia, Financial Services

Marje Josing.

“The reason would be the same that affected us in the economic crisis – the fall in compeittiveness,” she explained. Josing added that if Estonia will not be able to adopt the euro in the beginning of next year, the inflow of foreign investments would be smaller, the loans would be more expensive and the restructuring of the economy would be hindered.

According to Josing, the recommendation made on Wednesday about Estonia’s eligibility for the euro area and the upcoming accession eases the fears of investors who already have placed capital in Estonia or are planning to do so.

“It will certainly encourage foreign investors as although Estonia has stated on many occasions that devaluation would be pointless and would only hurt the local economy, it has often been difficult to explain to Nordic entrepreneurs – after all, they have the experience that they went through a devaluation and it helped in their case,” said the director of the institute. According to her, fear of devaluation among investors was very high.

Member of the management of the Estonian Chamber of Commerce and Industry and CEO of Standard Enn Veskimägi confirmed Josing’s assessments. “The message [of impending devaluation – ed.] certainly circulated among foreign investors, it had also been stated at conferences that I attended,” he said.

Veskimägi remarked that accession to the euro area would create advantages for Estonian businesses as thus far Estonia has been viewed as a part of the Baltic region, but now confidence in Estonia would grow significantly and competitiveness will improve as well.