TALLINN - In attempt to boost confidence, Prime Minister Andrus Ansip dismissed the Cassandras of doom and told investors that the economy was in excellent shape.
The prime minister was speaking at a conference held at the British Chamber of Commerce on April 22.
Ansip spoke about media concerns about cuts to the state budget.
"Where is this crisis? We expect to spend 16 billion Estonian kroons (1.02 billion euros) more than last year.
"We had to cut 3.1 billion kroons, but it means anyway that we can spend 13 billion kroons more this year than we spent last year. It is the biggest increase in state spending we had in our history," he said.
Ansip told investors that the figures backed up his claim that the Estonian economy had never been better.
"In December the unemployment rate in Estonia was 4.1 percent. This is the lowest unemployment rate we have in the history of Estonia," he said.
Ansip spoke in English in a conference largely designed to encourage foreigner investors from the United Kingdom, Scandinavian countries and other countries further away to keep investing in Estonia.
The premier accepted however, there were still problems with the labor market. He acknowledged that Estonia had become less competitive in terms of labor costs and that demand for higher wages meant the country could no longer compete against countries like China in particular in areas such as textiles.
"Estonia's place is not so good, it is a shame. We have to make our labor market more flexible," the prime minister said.
He acknowledged that the amount spent on research and development was way below the level of Sweden and Finland, but was keen to point out that Estonia had improved most in the European Union in the last five years.
"We have to pay much more attention in research and development sector," he said.
Ansip's analysis was in stark contrast to a raft of reports and figures that show that the economy may be heading for recession. The International Monetary Fund (IMF) in a report last week said that Estonia was heading for a hard landing.
The country has grappled with record-breaking inflation in the past few months.
Moreover, despite signs of recovery (see story aside) the housing market remains depressed with prices dropping as much as 20 percent since last summer.
The prime minister is known for his pragmatism. Last week he admitted that the property bubble has burst and that prices had fallen much further than the government anticipated.
Ansip remains confidence that Estonia can reach its target of becoming one of the five richest countries in Europe in the next fifteen years. He compared Estonia with Ireland, a country that has gone from being the poorest country in Western Europe to one of the wealthiest.
"We have to continue with 7.1 percent growth rate in the next 14 years 's it will happen," the prime minister said.
"In Ireland the growth rates were even bigger. If it is possible in Ireland, why not Estonia?" he said.