Committee chair: No mistakes can be made directing money to those in need
Chairman of the Economic Affairs Committee of the Riigikogu Sven Sester (Isamaa) said on Tuesday that economic aid packages resulting from the coronavirus outbreak have a direct impact on the state budget, and thus no mistakes should be made when channeling the money to those in need.
"Above all, however, measures should be targeted at those areas that have the greatest impact on the prevention of long-term economic damage," Sester said in a press release.
At a meeting via video call on Tuesday, the Economic Affairs Committee received an overview from representatives of the Bank of Estonia of Estonia's economic scenarios as well as the central bank's economic policy recommendations. The meeting was attended by Bank of Estonia Governor Madis Müller and Deputy Governor Ülo Kaasik.
Following the meeting, Sester said that opportunities for overcoming the crisis depend to a great extent on decisions to be made in the near future.
"Orientation and speed are important here — we need to focus first and foremost on measures that can be implemented quickly and that have as quick an impact," he said. "It is also important that these measures are temporary."
He added that the first effects of the measures aimed at mitigating the consequences of the coronavirus being discussed in the Riigikogu indicate the need for next steps. He specified that, according to the central bank, the measures currently being discussed — the Kredex guarantee, wage compensation — help alleviate short-term economic problems, and should the economic recession end up being longer, there will be an increasing need to address social issues.
Sester believes that it would be sensible to address longer-term steps, such as public investment, once the most urgent measures have been developed and are operational.
Committee deputy chairman Kristen Michal (Reform) said that the main effort of the crisis program must be to protect employment and prevent bankruptcies by taking swift and appropriate action so that the economy can emerge from the crisis more quickly and growth can recover.
"Fast and precise measures for economic recovery are important," Michal said. "Every week of restrictions means, as a rule of thumb, a decrease of about half a percent GDP across the year, meaning that, at €28 billion, we are losing €125 million per week in Estonia altogether."
According to the Bank of Estonia's scenario, if the emergency situation eases in early May, the Estonian economy may shrink by 6 percent. Should it ease in early August however, the Estonian economy may contract by as much as 14 percent.
Michal said that representatives of the central bank also said that restrictions on economic activity have had the greatest impact on the services sector.
"The number of registered unemployed has increased to over 44,000 — in one month, the number of unemployed increased by 20 percent," he added.
According to deputy committee chair, the central bank can see from a survey conducted by the Institute of Economic Research that after three months, the economy is estimated to be hit hardest by declining demand and then by a partial shortage of workers. "Therefore, they are also advising the country to address support mechanisms that can be mobilized quickly to have an immediate impact, and only then take steps with a long-term impact," he added.
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Editor: Aili Vahtla