The IMF finds that Estonia has been broadly successful in managing the COVID-19 pandemic, but the second wave has slowed the momentum of the recovery. Eesti Pank shares this opinion.

Governor of Eesti Pank Madis Müller said that the crisis has overall had less of an impact on the Estonian economy than was expected. The industrial sector and exports, which are more dependent on international trade, were hampered less by the coronavirus restrictions. “International demand for industrial output has already recovered to where it was before the crisis, and this has given opportunities to the Estonian exporting sector”, said Mr Müller. He added that it is currently very hard to estimate how the virus and the restrictions would affect the services sector in future.

Both the IMF and Eesti Pank considered that the state should support the recovery in the economy through the state budget until that recovery is firmly entrenched. After that it is important to find a balance between maintaining fiscal discipline and further increasing productive public spending. “We agree with the IMF that Estonia needs more investment in increasing labour productivity and in funding research and development work”, said Mr Müller.

Eesti Pank estimates that growth in the Estonian economy will pick up momentum in the second half of this year. The central bank is forecasting growth of 2.7% for the year as a whole.

“Once economic activity has recovered, it will certainly be appropriate to set the target of bringing government spending and revenues into line and moving towards a balanced budget as quickly as possible. The direction set in the most recent budget strategy is clearly appropriate. However, the return of the state finances to balance under the current plans would take substantially longer than in neighbouring countries”, said Mr Müller. “We have to rebuild our buffers because this will not be the last crisis ever”.

A delegation from the International Monetary Fund (IMF) visited Estonia virtually from 26 April to 14 May to discuss the state of the country’s economy, the resolution of the Covid-19 crisis and the economic policy steps taken because of it with representatives of the government and private businesses. The visit was part of the IMF’s annual mission to Estonia as part of the Article IV Consultation.

The concluding statement of the IMF visit can be found on the Eesti Pank website.

Additional information:
Ingrid Schmuul
Communications Specialist
Eesti Pank
Tel: 5697 9146
Press enquiries: [email protected]