The International Monetary Fund (IMF) finds that the Estonian economy is performing well, but recommends that a part of the spending planned in the state budget for the years ahead be postponed, and that investments that boost productivity be preferred. Eesti Pank shares this opinion.

Governor of Eesti Pank Ardo Hansson said that the Estonian economy is indeed in its best place for ten years, but growth will slow in future and this should be considered when economic policy is set. “Eesti Pank agrees fully with the assessment by the IMF that in the current economic circumstances the government should be particularly careful about its spending. In the next few years, the Estonian economy will see slower growth, a shrinking labour force and smaller European Union subsidies. If we are not able to save money now with the economy growing strongly, then we will never be able to”.

He added that one way to protect against overheating in the economy was to restrain state spending. “Not only will choices be made this spring for the budget for this year and next, but the state budget strategy out to 2022 and the European Union budget strategy out to 2027 will also be under discussion. The state needs to invest, but the government can make choices about the importance and timing of large projects. The state needs to invest more at times when the economy is growing and the private sector is not investing”.

Mr Hansson said the financial state of the banking sector is sound and the good access companies have to financing has supported growth in the economy. The most serious risks to Estonian financial stability at the moment come from the Nordic real estate markets.

The IMF delegation was in Estonia from 6-19 March for discussions with the public and private sectors on the condition of the Estonian economy and the economic policy steps taken and planned. The visit was part of the IMF’s annual mission to Estonia within the Article IV Consultation.

The concluding statement of the IMF visit

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Eva Vahur
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