Estonian Economy and Monetary Policy 9/2007

Monetary Developments & Policy Survey. September 2007

CONTENTS

INTRODUCTION
I SUMMARY
Main economic developments in 2007-2009
Global economy and Estonia's economy
External and domestic demand
Inflation
Labour market
External balance
Banking sector
General government
Economic policy conclusions
II GLOBAL AND EUROPEAN ECONOMY
Monetary policy environment
Inflation
Growth outlook
Financial and commodity markets
III MONEY AND CAPITAL MARKET
IV DEMAND AND SUPPLY
Domestic demand
Investment
Private consumption
General government
External demand and domestic supply
Industry and other fields of activity
Employment
External balance
V INFLATION
Consumer prices
Labour costs
Exchange rate of the Estonian kroon
VI ECONOMIC FORECAST FOR 2007-2009
Summary
Base forecast scenario
Economic growth
Domestic demand
Private consumption
Investment
Labour market
Wage growth pressures ease slowly
Tensions will mitigate primarily through unemployment
External balance
External debt
Inflation
Main goods and services
Motor fuels and thermal energy
General government
Banking sector
Corporate credit
Consumer credit
Housing loans
Risk scenarios
Risk scenario 1: A steep decline in the activity of property development
Risk scenario 2: Rapid wage growth will continue, i.e. nominal convergence will proceed without real convergence
Risk scenario 3: Borrowing is complicated
Risk scenario 4: Sectors that benefited a lot from domestic demand readjust themselves to export markets
Conclusions

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