Economic ministry official: Economy won't be restored to pre-crisis state

Deputy Secretary General for Economic Development Viljar Lubi speaking at a government press conference.
Deputy Secretary General for Economic Development Viljar Lubi speaking at a government press conference. Source: ERR

The economy will not be restored to its pre-coronavirus crisis state, the Ministry of Economic Affairs and Communications' deputy secretary general for economic development Viljar Lubi said on the "Otse Postimehest" ("Live from Postimees") webcast of daily newspaper Postimees on Tuesday.

"On the one hand, this is impossible because it is unsustainable and no country is even trying to do that. At the same time, there is a cleansing in every crisis. The stronger ones get stronger and the weaker ones disappear. The crisis is simply accelerating the process and the Estonian economy actually needs structural change anyway," said Lubi, who also heads the crisis measures work group initiated by Minister of Foreign Trade and IT Raul Siem (EKRE).

"The Estonian economic model has so far been largely based on cheap labor, but Estonia is no longer a country of cheap labor and we do not want to be that either," Lubi said. "Thus, the element of innovation, a smarter economy, now plays a much more important role. If we can accelerate these changes through the crisis, then we definitely want to encourage them on the part of the state."

Last week, Estonia's largest business organizations and professional associations were asked to appoint their own representatives to the working group. "Once we have the names, we will also send out invitations to actually meet. There is hope to do so in late July or early August," the deputy secretary general said.

"We have asked some umbrella organizations, such as the Chamber of Commerce and Industry and the Employers' Confederation, as well as more specific professional associations that have been hit hardest by the crisis, to join the work group. For example, the Estonian Travel and Tourism Association and small entrepreneurs," he said.

The leader of the work group did not rule out that members will be added, but the group cannot be made too large, because then the result may be poorer and more diffuse, he said. "We want to get concrete and practical input on how to make the current operation more effective," Lubi added.

Lubi said he believes that today, everyone is smarter about managing the crisis and should there be a second wave of coronavirus (COVID-19), it will not be as strong.

"It is likely that companies are also better prepared to ensure that the market failure will not be so severe," Lubi said, but added that it is still inevitable in some sectors: "In tourism, for example -- if the borders are closed and movement restrictions are in place, tourists simply will not be moving.

"Until now, we dealt with the first wave and did not have time to think about the second wave. Now, during a short break, which will hopefully remain permanent, it is possible to communicate with entrepreneurs and agree on how to do better.

"Every crisis is unprecedented and comes unexpectedly. Unpredictability was also the most important factor. It is not a classic economic crisis but a crisis imposed by other elements," he added.

At the beginning of the crisis, classic measures were implemented in terms of economic theory, that is how to keep jobs and help companies with liquidity problems, the deputy secretary general said.

"Unemployment Insurance Fund, Kredex' liquidity and support measures. We expected the crisis to be short-lived and that full support will not be needed," he added.

"Should there be a second wave, we need to be more nuanced in our approach. Some sectors or companies will definitely not recover in the same way as planned, maybe some will not recover at all."


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Editor: Helen Wright

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