Unlike several of its neighbors, Estonia does not offer financial incentives to its companies during what is a difficult period and in a situation where many countries do. This fact and different rules in Europe are hurting the competitive ability of Estonian businesses, Mait Palts, head of the Estonian Chamber of Commerce and Industry, told ERR.
Palts said that one does not need to look at Statistics Estonia's preliminary economic growth figures to realize last year was difficult for Estonian companies. The fourth quarter and a notable slump in tax revenue are worrying, he added.
He agreed with the Bank of Estonia in that Estonia's export capacity is threatened and highlighted different game rules in Europe where a lot of countries are paying their companies various benefits.
"Entrepreneurs are pointing to support measures offered in neighboring countries, which is a major problem for them. Estonia's neighbors in the west and north have made a fair bit of support available to their companies, and competing with them has become difficult so as not to say impossible," he noted.
Palts said that energy prices coming down gives hope that other states might pull their benefits, which would see the competition situation normalized. Nevertheless, Estonian businesses need to make efforts to close the gap, he added.
"Competition is fierce, and our companies need to make efforts to work more effectively and bet on niche products, custom solutions and R&D as that is the key to success in the long run," Palts said.
The head of the chamber suggested that while entrepreneurs agree that universal support is virtually impossible in Estonia, something should have been done towards the end of last year when the situation was worst.
"Something could have been done. It is something entrepreneurs have been asking us in recent weeks. The reason was that our neighbors did support energy-intensive businesses. We did not, which sparked dissatisfaction over difference in treatment. It would be best if the rules were the same for everyone, with or without support. State aid rules have been relaxed in Europe, which has allowed countries to offer their businesses more support. Hopefully, the rules will be made tougher again to level the playing field," Palts remarked.
He suggested that it is forecast the second half-year will be easier and more profitable for companies.
"Input prices have come down somewhat. But whether that is enough remains to be seen. We are also looking at strong salary growth this year or at least corresponding pressure. Hard to say, while I tend to believe demand could bounce back in Europe. Falling energy prices should restore optimism, improve demand and investments," he said.
Editor: Marcus Turovski