High debt threat to investment

TALLINN - Estonian Prime Minister Andrus Ansip took part in an event marking the 50th anniversary of the Organization for Economic Cooperation and Development (OECD), including a briefing on the organization’s latest Economic Outlook and high-level panel discussions, reports news agency LETA. The latest OECD Economic Outlook notes that the world’s economic recovery is on an increasingly stable footing, even though unemployment is still higher than it was before the crisis. Threats, in the OECD’s view, are rising oil prices, slower economic growth in Japan due to the earthquake, and problems related to high government debt in some OECD member states.

“The part of the Outlook that covers Estonia is positive and encouraging,” said Prime Minister Ansip. “It forecasts strong growth in gross domestic product and lower unemployment.”
According to the Economic Outlook, the Estonian economy will see consistent recovery this year, above all due to export growth. The country’s competitiveness has increased due to flexible wage policy and structural reforms.
Consumer spending is expected to gain momentum in 2012, while unemployment will continue to drop and real wages will grow. Even though inflation has been high due to the rise in the prices of fuel amd consumer goods, this, too, should decrease, according to the Outlook.

The OECD considers it necessary to carry out reforms that strengthen the budgetary positions and increase the employment rate in all countries. “Estonia has been quite successful in consolidating budgetary policy,” said Ansip. “Our experience, as well as that of other countries that have implemented a similar policy, shows that the primary prerequisite for new growth is a trustworthy macroeconomic policy.”
Ansip said that trustworthy macroeconomic policy will draw foreign investments. This will provide an economic stimulus and create new jobs.

A high level of foreign debt will reduce the capacity to place productive investments: “The countries of the eurozone spend an average of three per cent of GDP on servicing loans. That money could be used elsewhere, such as for research and development.”

Prime Minister Ansip also took part in a panel discussion on the Economic Outlook, where he talked about what the Estonian government undertook during the crisis, thus ensuring that the country would join the eurozone.
Ansip said that Estonia’s success in the crisis stemmed from reserves amassed in better times, public sector spending cuts, structural reforms and tax policy, which ensured revenue would continue to flow in the more trying times. However, said Ansip, this did not mean that no attention was devoted to social problems. The unequal distribution of income has eased over the years in Estonia, said Ansip.