EC Slashes Growth Forecast for Estonia ({{commentsTotal}})

Source: Photo: Reuters/Scanpix

A fresh economic forecast from the European Commission predicts a GDP growth of 1.3 percent for Estonia this year. The same institution had predicted 3 percent growth in spring.

The 2014 forecast was also downgraded a percentage point, to 3 percent, reported uudised.err.ee.

Despite the lower than expected growth, the commission remarked that Estonia's finances continue to be in good condition, nearly achieving a balanced state budget in 2013 and 2014.

The main engine of growth is domestic consumption, supported by real growth in salaries and a reduced income tax rate in 2015. In 2014, Estonia can begin expecting recovering external demand and private investments, according to the forecast.

Unemployment, at 8 percent in Q2, has continued to decline, while the lack of skilled labor, a higher minimum wage, and negotiated pay raises for medical employees and teachers have all pushed up salaries.