The central bank's fall forecast predicted a 3.6 billionkroon (230 million euro) deficit in 2008, the first deficit that the countryhas run since joining the EU.
Leaders of the central bank warned that in case of negative developmentsfiscal deficit may emerge as another problem beside inflation preventing Estoniafrom adopting the euro.
The government sector budget of a country switching to the euro must nothave a gap exceeding 3 percent of GDP. The gap of 2.5 percent forecast for nextyear is not far from that limit, therefore one needs to make efforts to preventthe deficit from jeopardizing the switch to the euro, governor of the Bank of Estonia Andres Lipstok said.
Lipstok told reporters on Wednesday that a fiscal deficit was acceptable inthe decline phase of the economy, provided that it was temporary and the budgetas a whole had a surplus over the length of the entire economic cycle.
The central bank also said that unemployment 's a problemthat the country has not seen in recent years 's was set to skyrocket, whilewage growth will drastically fall off.
The jobless rate is estimated to inch up from last year's 4.7 percent to 4.8perent this year and further on to 7 percent in 2009 and to 8.3 percent in2010, the central bank said.
The growth rate of the average gross wage is set to drop almost threefold --from 14.6 percent in 2008 to 5 percent in 2009. Since the rate of inflationwill be about the same, real wages are to remain unchanged.