Nordea Bank said in its latest economic forecast that only higher investments and labor productivity can lead to long-term growth in Estonia. This requires introduction of digital economy and new technologies in more traditional industries.
The bank said that for a small open economy like Estonia, the challenge is to use technology to achieve higher added value and move towards an export-oriented industry and economy of services.
When it comes to developing technology and its application in industrial strategy, the bank's Chief Economist Tõnu Palm recommended following the example of one of Europe's most successful exporters – Germany.
“Like Germany, Estonia is directed at export and therefore, depends on global competition. The share of industry and processing industry in economy is high in both countries, but when we compare economic structures, then we see that the added value from our research and technology sector contributes much less to our economy,” Palm said. “Estonia's long-term growth strategy should also foresee reforms on how to introduce digital economy and new technology to other industries in a cost efficient way. A key challenge is increasing productivity. We are among the fastest growing countries in the euro area. However, Estonian labor’s hourly productivity still remains considerably below the eurozone average.”
According to Nordea's new economic forecast, recovery on Estonia's export markets will be slow this year, but moderate economic growth will continue – the bank's forecast for this year is 2.0 percent and 3.1 percent for 2016, which is almost the double of average predicted for eurozone.
The bank also believes that domestic demand will continue to be the primary drive behind European countries' economic growth as the share of export remains modest due to the impact and risks of global economy.
The Stockholm-based Nordea Bank AB is a financial services group operating in Northern Europe. Its Estonian branch has been operating since 1995.
Editor: S. Tambur