Estonia's ability to cope with second covid wave depends on foreign markets

Asphalt laying in Sargvere.
Asphalt laying in Sargvere. Source: Olev Kenk/ERR

The ability of the Estonian economy to cope with a potential second wave of the coronavirus depends on foreign markets, experts have said.

While the situation is returning to normal in Estonia and many companies are working in their usual rhythm, many other countries are not so lucky. This is a problem for Estonia as many businesses rely on exports.

Kaspar Oja, an economist at the Bank of Estonia, said due to this the economic recovery in Estonia is not as fast as it could be and if foreign markets are doing badly, the government will not have few opportunities to stimulate the economy.

"There is no way for the state to buy products which are produced for foreign markets. The domestic market can be stimulated, for example by placing orders for construction, but in the case of the exporting sector, the stimulus is much more complicated and may not have such an effect," Oja said.

Arto Aas, CEO of the Estonian Employers' Confederation, also said the Estonian economy largely depends on the livelihoods of neighboring countries. If the wave of the coronavirus were to hit Estonia again, then, according to Aas, it is reasonable to continue with short-term loan measures and, if possible, also offer salary benefits.

"It has been a lot of help. True, it is very expensive and, currently, the Unemployment Insurance Fund no longer has reserves. In the short term, it would certainly be wise for the state to increase investment, be it in road construction, infrastructure or housing construction. It would also help our construction and industrial sector, which came through the first corona wave quite well, but for them the second half of the year is less clear and the risks are higher," said Aas.

Oja said the payment of salary benefits, such as the wage subsidy, depends on the extent of the potential second wave. It is also necessary to keep trade channels open.

Jaak Nigul, the head of the timber company Tarmeko, said if the state takes out a loan and pays subsidies to employers, it will only help in the short and long term. It is the companies which will have to repay the loan again in future.

"Companies are being paid for our own money. Does it help companies in the long run? In my opinion, certainly not. If the state really wants to help entrepreneurs, the number of state employees should be reduced by 25,000 - 30,000 people, and these are also the places that are not really needed, because they cannot be included in the list of essentials, they simply do not exist. Then there would be people who would even have to pick strawberries," said Nigul.

According to Oja, it is necessary to make savings in places in the public sector, but making big cuts would not improve the economic situation in the short term.

"Rather, it is reasonable to ask whether any of the expenditures planned here are still necessary," Oja said.


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Editor: Helen Wright

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