Euro accession drifts further away

  • 2006-11-15
  • From wire reports
TALLINN - Due to consistent inflation, it will be nearly impossible for Estonia to join the eurozone in 2008 and unlikely before 2009, according to a new economic forecast by the Central Bank.

The inflation level in 2006-2008 will be above 4 percent, the Bank of Estonia said on Nov. 9. Compared with its earlier forecasts, the central bank has raised the Baltic state's anticipated inflation level by 0.9-1.4 percentage points.
According to a forecast by the European Commission, eurozone economic growth should slow down to 2.1 percent and 2.2 percent over the next two years. The Commission predicted that in 2007, euro-area consumer price growth would decline as a result of rising interest rates.

Earlier planned hikes were held back due to relatively weak economic activity, and the rates are now expected to climb back to average levels.

Andres Lipstok, president of the Bank of Estonia, said that joining the euro in the coming years was not realistic, adding that inflation was likely to slow only after 2008. A VAT increase on thermal energy, from 5 percent to 18 percent, will exacerbate the current situation in 2007. The following year, excise duties on alcohol, tobacco and fuel will also rise, the bank reported.
However, economic experts perceive this growth as normal. At the same time, Estonia's higher inflation rate is characteristic of a rapidly developing economy and doesn't pose a risk.