An uncertain future means we need plans A, B and C says Madis Müller
Governor of Eesti Pank Madis Müller spoke at the Äriplaan 2021 economic conference on Tuesday, where he said that although the Estonian economy has outperformed expectations so far, the uncertainty caused by the outbreak of the coronavirus means that both businesses and the government need to have action plans for worse and better scenarios.
“We have been lucky that Estonia’s main export partners have been hit less hard economically than others have. The spring forecasts for Finland, Sweden, the Baltic states and Germany were more gloomy than what actually transpired. That is one of the main reasons why the Estonian economy suffered less than various forecasts feared in the spring”, he said.
He added that the second major reason was the wage support from the state, which supported the labour market and incomes. “The third reason why Estonia has done well is the banks here. The payment holidays granted by the banks put some 150 million euros in the hands of borrowers, allowing companies some breathing space during the crisis and letting them focus on their core business”, he continued.
He said that it would be wise for companies and the government to prepare plans A, B and C for the future to be ready should the economy develop for the better or for the worse. “The government should think through in advance the measures that it can take to support the economy if the crisis deepens and the state has to support the private sector again. Even in a deeper crisis, the support from the state to businesses should be temporary and carefully targeted to the sectors that are suffering the most”.
Mr Müller noted that it is also important to be ready to rein in government spending if the economy should start to recover faster than expected. “Eesti Pank’s recent forecast update shows that the Estonian economy may have recovered from the crisis by 2023, and so it would be sensible when making longer plans to set a target of bringing government spending back into line with revenues by that point”.