Analytics, Economics, Estonia, EU – Baltic States, Financial Services

At the end of the visit, Rosenberg made the following statement:

“Estonia’s economy is on its way to exiting a deep recession. After the nearly 20 per cent fall in economic growth during the years 2008-2009, we expect a small recovery to take place in 2010. However, domestic demand will remain weak for some time to come and hence the medium-long growth outlook will depend on the economy’s ability to re-focus on exports as well as on the developments experienced by Estonia’s trade partners.”

IMF expects the inflation rate in Estonia to stay low in coming years and the current account will be in surplus.

“As a result of firm actions taken by the public and the private sectors, the monetary committee system used in Estonia has stood up very well in the context of global financial market pressures. The economic flexibility maintained thus far indicates the ability to adjust to shocks even after Estonia’s prospective accession to the euro area in the year 2011, as the country has set itself this goal,” read the statement.

IMF added that due to remarkable efforts made by all Government authorities, particularly at the end of last year, the 2009 budget deficit remained significantly lower than the Maastricht criteria require. “Partly, this was achieved due to ad hoc budgetary measures and potentially revocable cost-cutting moves. Nevertheless, the organisation feels that although this year’s budget deficit will be probably higher than in 2009, it will stay below 3 per cent of GDP if spending will remain under strict control and the economic growth will recover as expected,” stated the delegation.

The IMF delegation emphasised that it is important in the future to guarantee budgetary sustainability in terms where the tax revenue would fall while there will be greater need to increase spending due to ageing of the population and structural unemployment.

IMF welcomed Estonia’s plans to raise pension age, writes LETA.

“The good results in budgetary policy that have in the past few years been supported by the common aspiration to accede to the euro area should not, however, be taken for granted,” read the delegation’s statement. “Budgetary authorities should certainly be strengthened; among other things, this means more transparent and more binding medium-long budgetary framework and setting of relevant budgetary rules,” added the press release.