The European Commission (EC) urges Estonia to take action on multiple fronts, including on fiscal policies, labor market participation, the gender pay gap and social and childcare services at local level.
The EC has published its country-specific recommendations for each Member State and the euro area, providing policy guidance for the next 12-18 months on key areas of action. Most of the Commission's country-specific recommendations to Estonia concern labor market and adult skills and education.
Based on the EC's spring forecast, the Estonian government's budget surplus is projected to turn into a deficit of 0.2 percent of GDP in 2015 and 0.1 percent of GDP in 2016. The government debt ratio is forecast to gradually decline from 10.6 percent of GDP in 2014 to below 10 percent of GDP in 2016. Moreover, the EC said there is a risk that Estonia will not comply with the provisions of the European Stability and Growth Pact and proposed to avoid deviating from the fiscal medium-term objective in 2015 and 2016.
Labor market issues
Estonia’s employment rate reached 74.5 percent of the working-age population in the third quarter of 2014 and the unemployment rate dropped to 7.6 percent, the lowest since 2009. The proportion of long-term unemployed is well below the EU average. However, the EC said that shrinking labor force, combined with low labor productivity, is becoming a medium-to-long-term challenge for the country.
According to EC, a lack of childcare facilities in Estonia makes it more difficult for young parents, mothers in particular, to return to work. “The quality of local authority labor and social services is uneven.” Therefore it advises Estonia to do more on ensuring high-quality social and childcare services at local level.
“The proportion of students in work-based apprenticeships is also low. There is a shortage of graduates in technology and science subjects,” the report said, recommending to increase participation in vocational education and training, and Estonia's labor market relevance, in particular by improving the availability of apprenticeships. “Focus public support for research and innovation on a limited number of smart specialization areas,” it further added.
In positive developments, EC highlights that the Estonian government adopted a lifelong learning strategy in early 2014 and programs to implement it were presented in March 2015. “A reform of curricula in the vocational education and training system is ongoing and participation in lifelong learning has increased.”
But the report also pointed out that the attractiveness of vocational education, training and apprenticeships remains a challenge. “Research and innovation systems and cooperation between business, higher education and research institutions have improved. However, public support for research and innovation, under the RDI Strategy and the Entrepreneurship Growth Strategy, seems to lack coordination and should focus more on a limited number of smart specialization areas. The higher education system, in particular as regards science and technology, still needs to be better aligned with the needs of business and research institutions. Investment in intellectual property is low and few companies work together with research institutions.”
The commission's report also specifically pointed out that the gender pay gap in Estonia is one of the widest in the EU and recommended to take action to narrow it.
The EC said that on the basis of the analysis, Estonia should ensure the full and timely implementation of these recommendations.
Editor: S. Tambur