"Things in the economy can improve only if we create the necessary conditions for it. At present, we lack the prerequisites for rapid economic growth. Without these conditions, I don't think it makes sense to wait for the light at the end of the tunnel. In my view, the problem isn't the absence of light but the absence of the tunnel itself. Right now, we're facing more of a dead end. We need to build that tunnel," Peeter Raudsepp, director of the Estonian Institute of Economic Research, told ERR.

"What needs to be done? First, we need to support businesses so they can increase the value they add to the economy. Second, we must significantly cut back on tax increases, lower the tax burden on companies and curb excessive taxation. Third, we need to drastically reduce bureaucratic, administrative and legal obstacles for entrepreneurs, enabling them to adapt quickly and reorganize their activities in the current circumstances without facing growing administrative burdens," Raudsepp said.

"Additionally, reducing bureaucracy would allow us to decrease the number of officials maintaining it, which could in turn alleviate some of the pressure for tax hikes," he added.

According to the tourism development plan drafted by the Ministry of Economic Affairs and Communications, Estonia should aim to position itself as a leading global digital society and a tourism destination known for its pristine nature, cultural diversity and authentic gastronomy. However, to translate these assets into tourism revenue, the country's level of hospitality must improve significantly.

"Of course, it's challenging to demonstrate hospitality when faced with constantly rising taxes and prices, but it is absolutely essential," Raudsepp commented.

Tallink CEO Paavo Nõgene remarked earlier in November on ERR's "Otse uudistemajast" webcast that Estonia has become an expensive destination for tourists and further tax hikes will only exacerbate this trend.

"Years ago, Estonia ranked sixth in Europe in terms of tourism revenue per capita. That was an excellent result, especially considering we lack ski resorts or sunny beaches. It was achieved in other ways. Recently, however, there have been significant changes, and I genuinely think that the quality of what we offer hasn't improved to the same extent as our prices have increased. The balance between price and quality has certainly been disrupted by price and tax hikes," Raudsepp said.

Speaking about retail, Raudsepp noted that there is no indication that retailers themselves are significantly driving price increases. Instead, market redistribution is helping keep larger price hikes in check.

"Grossi Toidukaubad and Lidl are expanding their market share by opening new stores. Currently, competition in retail is quite strong, which limits opportunities for anyone to sharply increase markups. I believe competition is doing its job here," he explained.

However, Raudsepp pointed out that while market volumes are declining, costs are rising. This inevitably leads to price markups.

--

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