Eesti Pank urges spending restraint

  • 2008-02-20
  • Mike Collier in association with BNS
TALLINN -- According to an economic commentthe Bank of Estonia published on Feb 20, the government must be prepared to cut its bugdetary expenditures if lessrevenue than projected is paid into the state budget.

According to the budget passed last year the sum totalof the state budget revenues should be 96.3 billion kroons(EUR 6.15 b).

Members of the government have denied until recentlythe need to revise their budgetary forecast, but FinanceMinister Ivari Padar said a few days ago that preparationsfor certain major public sector projects should be frozen because of below-target revenue intake.

According to the Central Bank the Estonian economyhad been generally moving in the direction forecast last Fall, though the outlook has deteriorated somewhat. Continuing confusion on the world financialmarkets and the expected slowdown of economic growth in theUnited States could rein in economic development of theEuropean Union, thus affecting Estonia, the bank believes.

In the opinion of the Bank of Estonia it is likelythat economic growth will slow down more than forecast thisyear, but so will inflation, particularly in the third and fourth quarters.

The latest assesment comes a week after the bank flagged up 2011-12 as its new target date for adoption of the euro.

"The fundamental principles of the Estonian and euro-areaeconomic policy are very similar, thus euro adoption is to be taken asa natural development for Estonia. The reason we cannot currently jointhe euro area is Estonia's high inflation level, which should fall tothe level prescribed by the Maastricht inflation criterion in 2009.Therefore, it is unlikely we can introduce the euro before 2011," SaidGovernor of Eesti Pank Andres Lipstok on Feb 15.