Economic Institute: Economy expected to improve by end of 2023

Peeter Raudsepp.
Peeter Raudsepp. Source: Siim Lõvi /ERR

The state of the economy is bad but is expected to improve by the end of the year, according to a new June forecast published on Tuesday by the Estonian Institute of Economic Research (Eesti Konjunktuuriinstituut).

"You have to be patient, after six months you will see some changes starting to take place. At the moment the negative processes are slowing down, we are seeing some signs of improvement in the economy," said institute director Peeter Raudsepp at a press conference.

The economic climate index fell by almost 9 points compared to March and is now -19.4. The economic downturn has been caused by global events beyond Estonia's control, he said.

The economic confidence index, which combines Estonian business leaders' and consumers' assessments, was 78.7 points in June, which is significantly worse than the long-term average and at a three-month low.

"Crises are different, and the way out of them will certainly be different. We are in a situation of slowing but high inflation," Raudsepp said. 

In six months, 38 percent of experts expect the situation to improve, 15 percent think the situation could be worse.

Tiit Riisalo. Source: Ken Mürk/ERR

The biggest problems are connected to low demand on both domestic and foreign markets and the lack of skilled labor — problems that have plagued Estonia for a long time — experts said. 

The lack of international competitiveness has become a significant issue.

"However, we are still a fairly low value-added producer country in Europe, around the top ten," said Raudsepp. "Energy, logistics, longer supply chains, high inflation, but also the resulting wage expectations, all affect the bigger picture."

However, experts are more optimistic about investments and private consumption over the next six months. Foreign trade has improved and an increase in exports and imports is expected.

Minister of Economic Affairs and Information Technology Tiit Riisalo (Eesti 200) said Estonia has been less affected by the difficult times and the country offers various subsidies to help those affected.

"The economy of the future will be smart and innovative, and if businesses can make the right decisions now, the future will be bright in terms of growth. I am also particularly pleased to see that business confidence in the country's economic policies has increased compared to the past," said Riisalo.


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Editor: Barbara Oja, Helen Wright

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