President's economic adviser: Our economy did well
Compared to other countries during the coronavirus pandemic, the Estonian economy did relatively well, the president's economic adviser Heido Vitsur said.
"We did well pretty certainly. Because if we look at the EU average being -6.4 percent and the eurozone's average at -6.8 percent, then we did more than twice as good. So, our drop was significantly smaller than in Europe on average," Vitsur told Vikerraadio.
According to data from Statistics Estonia, the Estonian economy shrank by 2.9 percent in 2020, while gross domestic product (GDP) fell by 1.2 percent year on year to the fourth quarter of 2020.
Vitsur said Estonia is in a "happy zone", where the economic recession was smaller. "We have placed ourselves in markets and products that helped us survive this crisis well. And we were not too silly ourselves," the analyst said.
Vitsur answered a question about possible cuts to wages, as was done during the last economic crisis, by saying wages cannot be decreased in the capacity they were then.
"I would remind everyone that wages and the economy grew at such rapid pace during the previous crisis that our last budget had an increase of 20 percent. It was a super-large growth, a huge increase caused by the credit bubble, where wage growth was in the double digits for several years, it was certainly overwhelming. Now it has been around 5-6 percent and it has been sustainable growth," Vitsur said.
"There might be some suppression of wages in some places - it is actually present in the HoReCa sector (the hospitality industry - ed.), where people sit on wage support or minimum wage and part-time employment. But where there is competition, wages will stay where they are," the president's adviser said.
Vitsur did not believe the HoReCa sector would recover rapidly even if vaccinations open the economy again. "There is the fear that once the vaccinations have done their job and the risk of infection is significantly lower, travel will not recover momentarily. Peoples' behavior is unpredictable in some capacity, but reactivating international tourism will take some time," he said.
Responding to a question about a possible state loan, Vitsur pointed out that Estonia has one of the lowest wage burdens of Europe and the world, but he did not directly say if he would support taking out a loan.
"You must know your people and your opportunities and act accordingly. I do not want to recommend a general form here, since our neighbor did, so should we. You must look at the specific situation," the analyst noted.
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Editor: Kristjan Kallaste