TALLINN - Responding to news that the country's economy nearly flattened out in the first quarter, Prime Minister Andrus Ansip has said that Estonia needed a period of slower growth after years of rapid economic expansion.
"We've been waiting for and also in need of a slowdown of economic growth for a long time. Continuation of the growth rates of the last couple of years was bound to result in an economic crisis," Ansip was quoted by the Baltic News Service as saying.
The prime minister did admit, however, that the flash estimate issued by the statistics office that the country's first quarter growth was 0.4 percent had come as a surprise.
By comparison, first quarter growth in 2007 was 9.9 percent and 11.2 percent for the entire 2006. GDP growth for the last three months of 2007 amounted to 4.5 percent.
The announcement sent a minor shock wave through the international economic community and threw a long shadow over the Baltic states. The region's blue-chip stock index 's the Baltic Benchmark 's fell 4 percent for the week.
"In the present phase of economic development we all should see to it that a healing breathing spell was followed by a swift rise in the economy. It is essential for jobs and production resources to move increasingly into branches competitive on foreign markets," the prime minister said.
"And it is imperative for our labor market to become more flexible. Because of that we should seriously consider even speedier implementation of the new employment contract law," said Ansip.
Still, the prime minister stressed that employment figures were strong.
"Despite the rapid slowdown of economic growth, unemployment remains very low, only 4.2 percent in the first quarter of this year," he said. "Some 657,000 people are employed, and compared to the first quarter of last year the number of employed people has even increased by 10,000."
Speaking in Brussels, Finance Minister Ivari Padar acknowledged the seriousness of the situation but called on everyone to keep in mind the larger picture.
"This quarterly figure is, of course, poor, and nobody is happy with it. But at the same time it is clear that very long forecasts cannot be made based on one quarter," he said.
Padar stressed the government's rapid response to the current situation by tackling a negative supplementary budget, observing that the planned cuts are timely and appropriate. But he declined to predict whether another supplementary budget would be necessary within this year.
He also did not rule out the possibility of a debate on taxes.
Andres Lipstok, governor of the Bank of Estonia, said the economy was undergoing a necessary correction this year and growth would return to a sustainable level.
"Estonia's economy possesses a solid basis for further development and resumed growth. This year will show whether we are ready to use these opportunities and preserve Estonia's strengths," Lipstok said.