Estonian economy robust

  • 2005-01-06
  • Baltic News Service
TALLINN - For 2005 Estonian economists have predicted stable prices, continued growth in wages and stock prices, and cheap loans.

"The premises at present are better than a year ago, so I expect slightly faster economic growth than last year," Leev Kuum, chief researcher with the Estonian Institute of Economic Research, told the Postimees.

According to Kuum, growth will be driven by increasing exports and investment. "It's also important that this year we'll be in the European Union for 12 months - and not eight like last year," he noted.

Ruta Eier, an analyst from Uhispanga Varahaldus (Uhispank Asset Management) said that the rapid growth in loans and in the real estate sector may slow this year and slightly curb economic growth.

Consumers spending will, according to analysts, increase at more or less the same pace as in 2004. In the first half of the year a rise in gasoline and electricity prices is also likely to affect inflation figures.

Unemployment, which has been stable at roughly 10 percent the last few years, should start declining this year on the strength of the favorable economic environment. The Finance Ministry has even predicted that the jobless rate would drop below 9 percent of the working-age population due to the opening of EU member states' labor markets, growth in structural funds and a decrease in tax evasion.

As to the price of oil, analysts observed that a further rise is inevitable. The per-liter price of motor fuel will probably climb by approximately 0.70 kroon (0.045 euro) by the end of the year.

Analysts expect stock prices to rise by approximately 15 percent due to both foreign investors' interest in the fast-developing East European markets and the growth of local pension funds.

Experts disagreed the most over the future of the U.S. dollar. Analysts at LHV and Suprema predicted a continued weakening over the coming year, while others expect the trend to change in the middle of the year with the dollar finishing 2005 slightly above the present level.