No. 17




Medium to Long-term Development Scenario for the Estonian Economy

18 June 2008


RiTo No. 17, 2008

The purpose of this article is to pinpoint the central problems faced by the Estonian economy in the medium to long perspective. Since 1999, Estonian companies and the government have considered it their primary goal to reduce public sector expenses as a proportion of the gross domestic output.

Due to this attitude, the public sector has not been given an active role in increasing the competitiveness of the economy – either that, or development plans that have been compiled have been left unimplemented due to lack of financial coverage. The position of the public sector in the development of the Estonian economy – both to this point and as planned for the medium to long term – can be described as a monitoring scenario. The factors of extensive development that have been responsible for economic growth to this point are beginning to run dry, and the low cost of labour, the primary component of competitiveness, is starting to fade. The economy must inevitably adjust to the new circumstances.

Estonian economic development crisis scenarios on one hand and the scenarios of inducing a positive shift in the economy’s competitiveness on the other hand might persuade representatives of Estonian misgovernment and business community of the need for a radical change in the role of the public sector. Naturally, the actual development itself has much greater persuasive power than any scenario. Unfortunately the only thing that comes of their own accord are, for the most part, crises; and learning from crises is costly, both in economic and social terms. To achieve a positive development shift, there will be a need to work in concerted manner toward specific goals and to provide the necessary resources for this work.

Full article in Estonian