Estonian Economy and Monetary Policy 1/2021

The mood of optimism that prevailed around the world at the start of the year has cooled. It was hoped at the start of the year that the arrival of new vaccines would give effective and immediate help in defeating the Covid-19 pandemic, but unfortunately there were almost immediately problems caused by the availability of the vaccines and concerns about their safety. The virus has started to spread more widely again in many areas, and this has led to additional restrictions on the economic activity of businesses. This will probably push any burst of growth in the global economy back into the second half of this year. The pandemic crisis lasting for a long time will hurt companies in the services sector first of all, and the biggest problems will be in countries like those of southern Europe where tourism is a larger part of the economy.

The economic crisis in Estonia will drag on for longer than was earlier forecast. The new and aggressive outbursts of infection and the restrictions imposed because of it will get in the way of any exit from the crisis at the speed hoped for earlier. The recovery of the economy will be delayed into the second half of this year, when the removal of the restrictions will allow a large part of the service economy to exit its recession. Things are less bad in manufacturing and goods exports, as international trade and demand for manufactured goods have already returned to their pre-crisis level.