European Commission lowers growth forecast for Estonia to 1.9% in 2016 ({{commentsTotal}})

The European Commission expects the Estonian economy to grow by 1.9% in 2016 and 2.4% the next year, the newly-released spring 2016 economic forecast states.

In February the EU had predicted 2.1% growth for this year and 2.3% for the next.

Real GDP growth in Estonia fell to 1.1% in 2015, from 2.9% in 2014. The fall reflects negative base effects in the electronics sector, sharply reduced demand in neighboring Russia, and low international oil prices, which affect Estonia's shale oil sector, the forecast argues.

"Private consumption boomed, supported by strong wage increases, income tax cuts and the absence of consumer price inflation. At the same time, business investment activity fell considerably due to weak external demand and the completion of major energy sector investment projects," the commission said.

Estonia's income level is expected to catch up with the EU average as its real GDP is forecast to grow by 1.9% this year and by 2.4% in 2017. While the global outlook remains uncertain, regional demand is expected to grow, raising Estonia's capacity utilization to a point where businesses will need to invest.

The large contribution of private consumption to growth will likely diminish in 2016 and 2017 as consumer price inflation picks up. Domestic demand, however, is projected to remain the main growth driver over the forecast horizon, the forecast states.

The Commission expects Estonia's harmonized index of consumer prices (HICP) to total 0.8% this year and 2.9% in 2017, while in February the indicators were 1% and 2.5% respectively. The commission expects the increase to be driven by higher excise tax rates, strong wage growth, sizeable annual minimum wage increases, and a gradual pick up in commodity prices.

Editor: Editor: Dario Cavegn

Source: BNS



Opinion
Easter Monday a public holiday? But you're forgetting productionEaster Monday a public holiday? But you're forgetting production
Estonia’s Easter Monday time loop: Discussing an additional day off

Every year, Estonia reliably asks itself the question whether or not Easter Monday should be made a public holiday. Opinions differ. While one side emphasizes the importance of family time, the other thinks an additional day off would threaten economic growth.

Minister of Social Protection Kaia Iva (IRL).Minister of Social Protection Kaia Iva (IRL).
Samost: Kaia Iva’s charisma could help IRL out of long-term low

In Sunday’s “Samost ja Rumm” radio debate show, editor-in-chief of ERR’s online news, Anvar Samost, and journalist and former politician Hannes Rumm discussed the potential and actual candidates for the chairmanship of the Pro Patria and Res Publica Union (IRL). At the time of the broadcast, Helir-Valdor Seeder had not yet made his intention to run public.