Commercial Banks: Slower Economic Growth Could Increase State Debt

SEB, along with Nordea Bank, has cut economic growth expectations to just 0.5 percent for this year. (Postimees/Scanpix)
4/30/2014 11:40 AM
Category: Economy

If economic growth is slower than forecast, the state's budget deficit will increase and Estonia will need to take out loans, said the SEB and Nordea banks.

The current budget put economic growth at 2 percent of GDP, but major banks are forecasting much lower figures, with SEB even predicting only 0.5 percent growth, ETV reported on Tuesday.

Swedbank analyst Tõnu Mertsina said the state should continue its fiscal discipline as social expenses will increase in the future and any other commitments, such as loans, should not be rushed into.

Finance Minister Jürgen Ligi, credited with Estonia's fiscal discipline, said his no-thrills policy will continue. He said the current budget strategy is geared towards boosting economic growth and the next period, between 2015 and 2018, will focus on cutting labor taxes and combating child poverty.

He said the state should always be more pessimistic than commercial banks or the Central Bank.


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