According to the economic forecast released on Thursday, the economy's recovery is supported by the continued slowdown in inflation, the expectation of interest rate cuts in the second half of the year and recovering foreign demand. Due to strengthening foreign demand, the Estonian industry is expected to return to growth.

The growth in private consumption is expected to be supported by the growth of the average real wage and the improvement of household confidence.

The Ministry of Finance forecasts this year's real GDP growth at zero percent, next year at 3.3 percent, and at 2.8 percent for 2026.

The nominal GDP growth for this year is projected to be 4.1 percent, and 6.2 percent for the next year. The GDP at current prices is €39.2 billion for this year and €41.6 billion for next year.

Unemployment is expected to grow moderately this year, with an unemployment rate of 7.2 percent. The Ministry of Finance forecasts the average wage's real growth at 2.5 percent, with the same growth expected next year. The average wage is expected to be €1,944 this year and €2,042 in 2025.

Additionally, the forecast anticipates that inflation will decelerate in the coming months, as energy prices have fallen and the increase in food prices has gradually slowed down. The growth of consumer prices is expected to be 3.4 percent this year. Inflation is projected to slow down even further in the following years.

Loan burden to start growing faster

The spring forecast states that a persistently large and deepening budget deficit will increase the debt burden at a faster pace than in the past three years. This will make servicing the existing debt more expensive, raising interest costs to 1.1 percent of GDP by 2028.

The rising cost of debt service places an additional burden on the budget, which may reduce investment capacity and hinder economic growth.

In 2025, the government sector's budget deficit will increase to 5.3 percent of GDP.

According to the forecast, the tax burden will rise to a record level this year, due to the increase in the VAT rate and a larger distribution of profits preceding the increase in the corporate income tax rate.

Next year, the tax burden will decrease, especially due to the implementation of a uniform tax-free allowance for those younger than retirement age.

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