TALLINN - In its economic policy quarterly comment, the Bank of Estonia lowered its
forecast of 2003 inflation in Estonia from 3.2 percent as earlier projected
to 1.5 percent.
The central bank did not revise its annual GDP growth forecast, leaving that
number at 4.4 percent.
The Bank of Estonia expects the current account deficit to total 14 percent.
At a press conference presenting the report, Bank of Estonia governor Vahur
Kraft said that accession to the European Union was of key importance in the
further development of the economy, and the people's "yes" vote in the
referendum would result in advances meeting investors' positive
Kraft said the government's budgetary policy had been encouraging and the
government sector had acted as balancer of the economy. He added, though,
that the size of the next budget concerned him.
"It is positive that plans to draw up a second supplementary budget were
dropped and also the next year's budget must be kept in balance, but the
17-percent growth in the budget next year is unprecedentedly high," he said.
Kraft said that Estonia's decision not to accede to the European Union would
mean a rise in interest rates and relinquishment of investment projects, as
a result of which GDP growth would slow down. Additionally, the economy
would be deprived of large amounts of money from EU structural funds that
have already been taken into account in drawing up the state budget.
The central bank said that a decline in investments, both in the government
and the private sectors, could lead to economic growth slowing down by up to
one-fifth, although interest rates would apparently not go up as sharply as
after the Russian crisis.