The Bank of Estonia warned last week that the government must implement urgent policy measures to stave off a series of risks that threaten to derail economic growth.
Specifically, the bank said Estonia needed a national budget "with a purposefully planned surplus." At the present stellar rate of growth 's 10 percent in the second quarter of 2005 's the ratio of budget surplus to gross domestic product should be at the 2003 level, the bank said.
In addition, both the government and the central bank need to act in coordination to curb the consumer lending boom and encourage saving. The bank said that the private sector's loan burden has grown to 90 percent of GDP. Despite the recent reforms on income tax, the ratio of public spending to GDP has not declined.
