According to the economic forecast for 2008-2011 produced by the Ministry of Finance in summer and published today, the growth rate of the Estonian economy is set to slow to a more sustainable level. Prices and salaries are expected to rapidly reach the European Union average.
“Based on this forecast, there’s no need for anyone to worry about the state’s finances and budget!” said Minister of Finance Ivari Padar. “The revenue we planned from this year’s budget is coming in nicely, and we’ll have more money to use in 2008 than we planned for in spring too. Before the budget strategy negotiations we forecast a budget for the coming year of around 90.6 billion kroons, but now we’re looking at 96.2 billion.” Government sector debt will also continue to decrease, falling to a record low of just 1.6 percent of GDP by 2011.
The forecast indicates that economic growth this year will be 8.1 percent, with 7.3 percent growth in 2008. “Estonia’s economy will be displaying growth figures like this for the next few years too, setting a fine example,” said Andrus Säälik, director of the Financial Analysis Department of the Ministry of Finance. “Further strong growth in exports is expected in the majority of goods groups, with domestic demand growing quite quickly from here on in – and these are the main factors influencing growth. Compared to the last few years, though, the growth rate will slow a little in both areas. Logically, this will mean a slow-down in import growth too.”
Prices are predicted to rise this year by 6.1 percent, with a further 7.4 percent rise in 2008. “The rise in prices is considerable, but the growth in people’s incomes this year and next will be even more so,” Minister Padar remarked. “It’s natural in a country like Estonia with a rapidly developing economy that prices and salaries are quickly approaching the EU average. In the last three years we’ve undergone really rapid development – our buying power is now up to 69 percent of the European Union average, whereas in 2004 it was only 53 percent. I hope that the brisk growth in salaries will see some of those people who have gone abroad to work returning to Estonia, too.” According to the forecast, realistic growth in gross salaries in 2007 (i.e. taking the effect of rising prices into account) will be 13.5 percent and 7.3 percent in 2008.
The employment rate in Estonia is also expected to remain high, and indeed continue to increase, in the coming years. The rate rose by 6.4 percent in 2006 and has risen a further 1.2 percent this year. The unemployment rate is decreasing steadily, falling to 5.3 percent by the end of 2007.
Explanations, presentations and press conference recordings about the forecast are available from the Ministry of Finance website at http://www.fin.ee/?id=263.
See also: Press briefing outlining forecast in more detail (doc)
Source: Ministry of Finance