Economist: Electricity cable failure to affect GDP less than tax rises
Due to the repair of the Estlink 2 undersea cable electricity prices may increase. Bigbank's Chief Economist Raul Eamets said the impact on Estonia's GDP will likely be smaller than that of the upcoming tax hikes.
The 150-kilometer electricity cable connecting Finland and Estonia was damaged on Christmas Day. Finnish authorities suspect the Cook Islands-flagged oil tanker Eagle S is to blame.
Repairs are expected to take around seven months. When Estlink 2 was out of service last year, prices rose by approximately 10 percent.
Eamets told ERR if electricity prices were to rise by a similar magnitude throughout the cable repair period, the effect on Estonia's GDP would likely not be significant.
He explained that electricity prices are primarily influenced by winter weather. If the mild conditions continue, the impact will likely be negligible. The situation may change if the temperature suddenly drops.
Another key factor is the amount of renewable energy available. The sunnier and windier the weather, the less electricity needs to be imported from the Nordic countries.
"I believe the impact will be of a similar scale to the previous outage. Next year, GDP is more likely to be affected by various tax hikes," Eamets noted.
Electricity transmission system operator Elering said it is impossible to know how long EstLink 2's repairs will take. The work depends on accessing a repair vessel, but there are few of these world wide, and the condition of the cable.
--
Follow ERR News on Facebook and Twitter and never miss an update!
Editor: Karin Koppel, Helen Wright
