Chamber of commerce head: Estonia could borrow for investments

Toomas Luman.
Toomas Luman. Source: ERR

Construction businessman Toomas Luman, recently re-elected as head of the Estonian Chamber of Commerce and Industry, said on the "Esimene stuudio" talk show that he is not convinced a die hard course for fiscal balance is the right way to go in Estonia, especially as major European countries will never ger there.

Luman said that there is no stagnation at the chamber. "I have not seen people waiting in line to give running the chamber a shot. People ask me whether I will go first or whether it will be [Alexander] Lukashenko. But I'm younger than he is," the businessman said.

Luman often calls politicians. "I have not tried to phone the PM now, while the finance minister and I have been trying to schedule a meeting for two months now but it has not worked."

The head of the chamber said that the economic situation can get worse. "I tend to be diplomatic and am rather not a straight-shooter. The PM visited us today, and I can't tell you how differently people can view the same situation. The head of government told us that growth will return next year. The question is how far will we fall before that happens," Luman suggested.

He said that other indicators besides economic growth need to be looked at. "The fourth quarter saw the biggest slump in investments in fixed assets. It is difficult to see growth coming from that. Investors are not trusting, confidence is below what it is elsewhere in Europe. Relevant effects include interest rate hikes, waning foreign and domestic demand, inflation, war. The politicians fail to realize that the Baltic region was once a window to one-sixth of the world. It made sense for investors to set something up here and sell it on the vast Russian market. Today, the iron curtain runs here," Luman suggested.

The businessman compared Estonia to Portugal that is out of the way of global trade routes, which its low living standard reflects.

He said that Estonian entrepreneurs are worried today. "I'm a realist and crying about it won't help. But we will not be able to make the right decisions if we do not see the big picture. And looking at the big picture, I'm not sure the ECB's policy of sharp interest rate hikes is the way to go. Interest hikes can bring down inflation caused by easing, while today's raw material and energy price hikes are not in fact caused by that, and rate hikes will have no effect on those."

Luman suggested unemployment will grow in the second half-year but not dramatically. "But I cannot see net purchasing power returning," he added.

"Lower production volumes mean layoffs. Looking at the timber sector, the problem there is with national currency rates. The value of the Norwegian krone and Swedish krona to the euro has decreased. While entrepreneurs have to overcome the problem, the government could help them find new markets. We cannot say that businesses should solve all problems by themselves."

We should also try and see the bigger picture in terms of economic policy, Luman found. "I tend to be conservative and in favor of fiscal balance, and I do not believe fixed costs should be covered using loan money. But looking at major European countries, our public debt is 19 percent of GDP, while the Eurozone average is 90 percent. It's over 100 percent in France. Let us be realistic. These major countries will never get back to the 60 percent required by the EU stability pact. If they are not getting back there, we might ask whether clinging to our 19 percent at all costs is sensible," Luman reasoned.

"Fiscal deficit forecasts suggest we are on course to improve our position – great. At the same time, the OECD puts Estonia's deficit at half the Eurozone average. We should consider whether it would benefit us to go with that deficit and borrow for investments. At the current level, we can afford to build one kilometer of paved roads in every county – it's not serious," the head of the chamber suggested.

Luman also said he does not understand why the government seems intent on being at odds with the media over €3 million that hiking the periodicals' VAT rate would generate as revenue. "I understand the tax theory, while I do not get the political logic here. The only thing this will achieve is for the government to fall out with a highly influential group of people shaping public opinion. And then we wonder why ratings are down," Luman said.

"Deciding taxes without analysis is not good practice. The damage to reputation has been done, I just don't see the need," Luman remarked when talking about the periodicals' tax hike.

Referring to public sector cuts, Luman said that the business world has been saying all along that layoffs need to be aimed at officials and not public servants.


Follow ERR News on Facebook and Twitter and never miss an update!

Editor: Marcus Turovski

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: