Finance ministry forecasts 2021 economic growth of 9.5 percent

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Finance minister Keit Pentus-Rosimannus (Reform) at a press conference Thursday, announcing the ministry's summer economic forecast. Source: Siim Lõvi /ERR

The economy will grow by 9.5 percent this year, the finance ministry says, and by 4 percent in 2022. The ministry says inflation will be 3.8 percent this year, slightly lower in 2022 and substantially lower (around 2 percent) in 2023-2025.

Speaking at a press conference Thursday announcing the ministry's summer economic forecast, finance minister Keit Pentus-Rosimannus (Reform) said: "Our economy has recovered at a rapid pace, and we are largely back to pre-crisis levels," though noting the coronavirus crisis has benefited some sectors and harmed others.

The government prepares its draft state budget partly on the basis of the summer forecast.

The ministry forecasts real economic growth of 2.6 percent in 2023, 2.9 percent in 2024 and 2.8 percent in 2025.

Inflation will run at 3.8 percent this year, then slow slightly to 3.7 percent in 2022, and more sharply to 2.1 percent in 2023, and 1.9 percent in 2024 and 2025, the ministry says.

Unemployment is expected to fall just 0.1 percentage point to 6.7 percent this year, but more substantially for 2022 (to 5.8 percent). After that the curve will flatten at 5.7 percent unemployment in 2023, and 5.6 percent both for 2024 and 2025, according to the ministry.

Average salaries will rise 7 percent this year, 6.7 percent in 2022 and 6 percent in 2023, the ministry adds. In 2024 and 2025 the respective figures will be 5.5 percent and 5.4 percent.

Finance ministry:  Budget to run structural deficit of 4.4 percent in 2021

The ministry says the budget will run a nominal deficit of 3.3 percent, and a structural deficit of 4.4 percent this year. 

A structural deficit of 2.3 percent is expected for 2022, while a deficit of 1.1 percent and 0.5 percent, respectively, are expected for 2023 and 2024.

In 2025, however, a structural budget surplus of 0.2 percent is forecast, the ministry says.

The ministry forecasts a nominal deficit of 1.8 percent next year, 1.1 percent in 2023 and 0.4 percent in 2024. In 2025, however, a nominal surplus of 0.3 percent is expected.

The debt burden will decrease from 18.5 percent last year to 17.7 percent this year, but will increase again to 19.3 percent in 2022.

In 2023, the debt burden will be 20 percent of GDP, in 2024 it will fall to 19.2 percent, and in 2025 to 17.9 percent.

The state budget bill for 2022 has to be finalized at the end of this month, and is then sent for debating and voting at the Riigikogu, with a view to getting signed into law by year-end.

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Editor: Andrew Whyte

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