Experts predict stable growth for Estonian economy

  • 2006-10-11
  • Staff and wire reports
TALLINN - Last week was abuzz with predictions for the Estonian economy. The Institute for Economic Research released a survey of experts and residents on their opinions about the economy. Most said they felt optimistic about economic prospects and continued stable growth, and offered several methods to keep it growing.

The economic situation in Estonia remains favorable and the danger of overheating should not be exaggerated, the Institute for Economic Research emphasized.
Estonia's 10 percent economic growth rate is sustainable, director of the institute, Marje Josing, said at a news conference on Oct. 6.

Life has not been better in Estonia since the "ice age," said Heido Vitsur, adviser to Economy Minister Edgar Savisaar. "It's fairly certain that the economic boom will continue for at least the next six months," he added.
Economic experts surveyed by the Institute for Economic Research largely viewed the state of Estonia's economy as healthy and 88 percent believe the situation six months from now will be at least as good as today.
The current state of investment and private consumption was seen as good by 94 percent of respondents, while 6 percent considered the situation to be satisfactory.

Seventy-six percent of the economists surveyed expected exports and imports to grow in the next six months with nobody predicting a decrease. In regard to the trade balance, 12 percent anticipated a decrease and 29 percent hoped to see an improvement. The remaining 59 percent forecasted a continuation of the status quo.

Nineteen percent of the experts foresaw a further rise in inflation, and 25 percent predicted a decline. But the majority, 59 percent, believes that Estonia's inflation rate will stay constant. Most economists are convinced that interest rates will rise.
Looking to the future, the experts assembled at the Oct. 6 press conference identified challenges to growth.
Senior researcher at the Leev Kuum Institute said Estonia's reputation as a cheap country is nearing its end, and the future needs to see more investment in technological development. At present, a number of positive processes are underway that affect the country's economic development as a whole, he said.

Nevertheless, it pays to look out for risks that lie ahead, Vitsur warned.
"One risk is quite clear, in four years' time the generation born at the bottom of the demographic trough will reach its working age," the adviser said. "Things will get tough when there is no longer any labor available."
That being said, consumers are positive about the direction of the economy.

Of the Estonian residents surveyed, 11 percent viewed the economic changes over the past 15 years as very good, 40 percent as good and 40 percent as satisfactory. Five percent considered the changes to be unsatisfactory and only 1 percent saw the last 15 years as very bad.
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