Estonian analysts: Economic measures may have to be extended ({{contentCtrl.commentsTotal}})

The protection money (Estonian: Katuseraha) component of the state budget has come in for some criticism, in particular from the Reform Party. Others say that it is simply the icing on the cake and not the main event (picture is illustrative).
The protection money (Estonian: Katuseraha) component of the state budget has come in for some criticism, in particular from the Reform Party. Others say that it is simply the icing on the cake and not the main event (picture is illustrative). Source: (Marco Verch/Wikimedia Commons)

Analysts at Estonia's biggest banks believe the government's €2 billion package to support the economy from the impact of the coronavirus (COVID-19) on businesses probably needs to be extended.

On Friday, Swedbank chief economist Tõnu Mertsina said at a roundtable of the Estonian Banking Association: "The current support package of the government in broad terms is integral and sensible." 

SEB economic analyst Mihkel Nestor said that the direction taken with the package was right. 

Mertsina, Nestor, and Luminor chief economist Tõnu Palm, all said that it will be necessary to extend the package in the future as initially it is only meant to support the economy for the next few months.

Palm said the government it should be prepared for extending the first package of measure. 

Mertsina agreed and said: "I'm afraid we will not solve this problem by the end of May."

Commenting on the government's decision to suspend payments into the second pension pillar, LHV analyst Kristo Aab said as this government has given a signal that the second pillar is not important to them, the step was logical.

Aab said the government's expectation is to increase its revenue by approximately €200 million this year by suspending the payments. This, according to him, is not sensible given that the government is planning to borrow €1-2 billion. He said suspending the payments also means lower yields in the future.

Palm, too, stressed the importance of the second pillar, especially in a situation where people don't have sufficient savings to cope in a crisis like this.

"Dismantling the second pillar is a big mistake, this is demonstrated also by the current crisis," he said, explaining that the state should use the borrowing option instead.

Nestor and Mertsina encouraged residents to invest in the third pillar, meaning a voluntary pension fund, for their retirement. 

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Editor: Helen Wright

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