Bank of Estonia governor Madis Müller said Estonia invests less in innovation and digital solutions than the European Union average, which endangers the country's competitiveness in the long run.
Speaking at a joint investment seminar of the Bank of Estonia and the European Investment Bank (EIB) on Thursday, Müller emphasized that in order to maintain Estonia's competitiveness, entrepreneurs need to invest more in innovation and research.
"Less investment in innovation is particularly evident in private investment. The Estonian economy is more dependent on exports than most European countries, which is why the international competitiveness of local production is extremely important for economic development," the central bank governor said.
Müller added that if Estonia wants to become more prosperous, it must at least keep pace with innovations, and ideally outperform its competitors - be it the development of digital solutions or the implementation of climate policy.
Estonia's current account has been in surplus in recent years, which means that Estonia no longer borrows money from abroad and as a country Estonia saves more than it invests.
"We need to understand the reasons why companies no longer consider investing in Estonia promising enough. While Estonia has so far had an attractive business environment and our country has supported investments with retained earnings tax exemption, then now it seems that this is no longer enough," Müller said.
The central bank governor said in future it is necessary to find additional ways to be attractive to foreign investors and encourage local companies to expand.
He acknowledged that in the current crisis, investment is being held back by the uncertain economic outlook. At the same time, the results of the EIB's research revealed that Estonian companies have experienced fewer obstacles in financing new projects than elsewhere in Europe.
"The further development of the economy and companies depends largely on how the crisis is resolved. Uncertainty is still very high. It is all the more important that the government is able to ensure a stable business environment and announce changes long in advance," Müller said.
Editor: Helen Wright