No. 16




The near future of the Estonian economy as seen though the eyes of the Minister of Finance

19 December 2007


RiTo No. 16, 2007

The primary risks related to the Estonian economic environment are currently related to strong inflationary pressure, the extensive cooling of the real estate market, and the large current account deficit.

Under the current currency board arrangement, budgetary policy is our primary means of influencing the economy and controlling risks to balanced economic development. In a situation where in recent months inflation has predominantly stemmed from factors in the external environment and where future excise duty hikes are written into legislation, the state lacks measures to control short-term inflationary pressures. The only thing within our power is to continue a countercyclical budgetary policy which prevents the state from adding to the inflationary pressure, and which also allows the government to avoid excessive administrative price hikes. Conservative fiscal policy will ensure that the public sector has a low debt burden, which is in turn one requirement for maintaining sustainability of state finance in the long term.

Full article in Estonian