Eesti Pank predicts economic growth of 10 percent

Eesti Pank.
Eesti Pank. Source: Siim Lõvi /ERR

The rating agency Standard and Poor's (S&P) forecasts a 5.5 percent growth for the Estonian economy this year, a firgure which, according to the Bank of Estonia (Eesti Pank), could reach as high as ten percent.

Standard and Poor's affirmed Estonia's sovereign rating at the current level of AA-, but raised the rating outlook from stable to positive. Raising the rating outlook means that the Estonian economy has performed better than expected in the crisis.

"The performance has been even better than expected and better than in most other European countries. If we look ahead to what this change in assessment should mean, the forecasts for the Estonian economy are rather optimistic and the agency's assessment should be seen primarily in the context of public finances," Bank of Estonia economist Rasmus Kattai said.

Rector of EBS and Professor of Economics Meelis Kitsing noted that in the last major crisis in 2008-2009, Standard and Poor's downgraded Estonia's credit rating, from A, to BBB.

The country has borrowed less than expected in the crisis, while raising the rating outlook will make the loans situation more favorable, he said.

"If in a situation where the state wants to take a loan, a price tag will be attached to this loan, then the rating of the Estonian state's solvency is definitely one of the arguments that shapes this interest on the loan," Kattai added.

Undersecretary of the Ministry of Finance Märten Rossi told ERR that a high rating should provide certainty for those investors who rely on rating agencies to make investments in Estonian companies more boldly.

"I'm not saying it has a very significant, supportive effect on the price of debt and the courage to invest, but it is there," Ross said.

Kitsing said that the rating is a signal of a country's credibility. "It is good that this has not been lowered, and rather the outlook has instead been raised to positive. This means that when investors make decisions, they can take this into account as an important factor."

Standard and Poor's forecasts Estonia's economic growth this year at 5.5 percent, and next year at 4.8 percent. According to Eesti Pank, growth may be even faster.

"Probably this year's growth will be even higher because the first quarter was already very fast growing. The second quarter's growth seems to be somewhere close to 10 percent or even more. If we look at the first half of the year If the economy cannot, then for the year as a whole, economic growth may already be a little below 10 percent," Kattai said.

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Editor: Roberta Vaino

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