Central bank: COVID-19 has shown importance of integration, cooperation

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Bank of Estonia coat of arms. Source: Siim Lõvi /ERR

New opportunities for Estonian businesses have emerged during the COVID-19 crisis as global supply chains get shorter and become more regional, said Governor of the Bank of Estonia (Eesti Pank) Madis Müller at a conference on economic security on Wednesday.

Müller said there is a global trend in shortening the supply chains for the production of critically important products and components. "The strength of the Estonian economy comes not from acting alone, but from participating in international supply chains and projects. The success of our economy, and more broadly the key to security, is integration and cooperation," he said.

He noted that being a member of the euro area is an example of this integration that has benefited Estonia. "The Estonian government has been able to borrow at very good rates during the current healthcare crisis, and the euro is a clear reason why investors thought it safe to lend to the government."

Getting over the crisis will help to diversify the output of the Estonian economy and its export markets. "It is very important that we have a distributed approach with different goods and services and we are not dependent only on some individual export products or export markets," Müller explained.

He emphasised that the government must play a central role in the recovery from the crisis. "It is important to provide temporary support right now, but the key question for increasing the wealth of the people of Estonia is how can we make investments that are focused on the future. The direction needs to be towards having more innovative solutions in the future and greater knowledge intensity in our activities."

The Bank of Estonia governor added that achieving this would require the support from the EU to be invested as wisely as possible. The finances of the Estonian state must not be overlooked in the long perspective either. "Our debt level is currently low, but it is growing and the question is whether we will be able to limit that in the years ahead," Müller said.

The central bank governor quoted the outlook for the Estonian economy given in the recent Bank of Estonia economic forecast, which expects the economy to start recovering more quickly in the second half of the year and annual growth will be close to 3 percent.

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Editor: Kristjan Kallaste

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