TALLINN - Estonian companies could be the first to emerge from the economic crisis if relations between businesses and the state are strengthened.
A recent report by PricewaterhouseCoopers (PwC), on relations between the corporate and government sectors under conditions of global economic decline, showed companies in Estonia survived the first serious impact from the economic crisis using their own means.
Commenting on the 12th annual report, Juri Etverk, a leading consultant with PwC, said Estonia was well placed to ride out the economic storm due to ongoing cooperation between the state and businesses.
The global report, based on a survey of executives by PwC and presented at the World Economic Forum in Davos in January, shows that corporate leaders are supportive of more active involvement by governments in matters of the economy on the condition it will produce concrete results.
As things stand now, stability and legal certainty are more important for the Estonian enterprise sector than direct financial support, said Etverk.
Speaking at a business forum organized by Sampo Bank on March 10, business leaders said the government must make a choice between deflation and devaluation in order to improve Estonia's economic situation.
Estonian businessman Juri Kao said that if the state did not follow the private sector in cutting its expenses, devaluation would follow.
Risk capitalist Allan Martinson said that devaluation should be seen as a normal instrument of economic management.
One of the solutions would be if all three Baltic States simultaneously devalued their currencies and acceded to the euro zone.
Opinions remain divided on whether restoration of export or domestic markets would have the most beneficial impact for Estonia.
Business leaders also mentioned the return of a normal banking environment, as well as the opportunity for the acquisition of companies and assets and for the merger of companies as important preconditions for economic recovery.
Most felt the level of Estonia's GDP for next year would remain at this year's level at best, in case there was no devaluation or other major shocks.
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According to the spring forecast of the Finance Ministry the Estonian economy will fall by 8.5 percent this year compared with last year's fall of 3.6 percent.
Meanwhile, latest forecasts of the Bank of Estonia predict the gross domestic product (GDP) of the country will fall by 5.5 percent according to the main scenario, and by 8.9 percent according to the supplementary scenario.
"It is no doubt a complicated time for Estonia. At the same time the economic fall gives us the opportunity of making our economy more effective and stable," Finance Minister Ivari Padar said.
On March 31 Estonian Prime Minister Andrus Ansip ruled out the need to draw up a new negative supplementary budget.
Instead payments into the second pillar of old age pensions will be suspended for two years in order to improve the government sector's budget position.
It was previously thought further austerity measures would be necessary in light of ongoing economic uncertainty.
Ansip said that it was possible to hope on the basis of the economic forecast that it was realistic to meet the criterion of accession to the euro zone already this fall, which would make it possible to adopt the euro in Estonia at the beginning of 2011.
However, the government has decided to leave open the opportunity of accession to the euro zone from July 1, 2010.
PwC surveyed top executives during a period that lasted from last September to November. In All 1,124 corporate executives from 50 countries were interviewed, including 10 from Estonia.
