The IMF has concluded their annual official staff visit (or ‘mission’) to Estonia. The mission team commended the country’s economic policy and reform plans, but expressed concerns about weak productivity growth. They said Estonia will have to find ways to balance productivity and wage growth and to promote competitiveness. Eesti Pank shares this view.
Governor of Eesti Pank Ardo Hansson emphasised at the press conference that Eesti Pank has long observed with concern how productivity growth has been lagging behind wage increases and how corporate profits have been shrinking. “Against the background of overall slow growth both the number of the employed and average wages have increased. Growth has come from labour-intensive sectors, whereas relatively capital-intensive fields of activity such as energy and mining have seen a decline in value added. For the sake of the future of Estonia’s economy, the government’s policy has to be focussed on measures that contribute to growth potential,” Hansson said.
Eesti Pank does not think the state should intervene to stimulate demand. “Estonia’s employment and wage growth figures confirm that state intervention to boost demand is unnecessary,” Hansson stressed.
Hansson pointed out that the key elements of Estonia’s economic growth are developments in our export markets and the competitiveness and export potential of our companies. “In this light it is especially important for the government to make decisions based on the long-term sustainability of public finances not in the interest of short-term gains,” he said.
The IMF’s annual visit to Estonia lasted for a week and a half and ended on Monday. The mission team discussed Estonia’s economic policy, focusing on the reasons behind the country’s weak economic growth. The team was particularly interested in the competitiveness of our economy, the labour market situation, ways to increase productivity, and the role of the state in the Estonian economy.
Source: Bank of Estonia
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