Vitsur told ERR in a comment that while the economic downturn has been gradually shrinking, the key takeaway is that the fourth quarter was very strong. He pointed out that as recently as late January, Statistics Estonia had estimated that the fourth quarter would see a slight decline.

"But now there was quite decent growth — 1.2 percent. This could mean that the fourth quarter was a turning point. However, it could also indicate some temporary irregularity. But at least there was no decline — there was growth. That is now more or less a fact," Vitsur noted.

According to Vitsur, the biggest obstacles to economic growth at the start of this year are excessive bureaucracy, growing uncertainty worldwide and Europe's near-zero economic growth.

"In a situation where entrepreneurs no longer know what they can and must do, it becomes very difficult to invest and develop production," he remarked.

While geopolitical risk does play a role in attracting foreign investment, Vitsur stressed that Estonians should be more self-confident and not overemphasize this issue.

"There is no doubt that the geopolitical risk is highest in the Baltics. But if we keep talking about how enormous it is, we are only making things worse. Instead, we need to talk about what we are capable of achieving, rather than saying our risk is terrifying and disaster is imminent. If we do that, no one will come here," Vitsur said.

According to a flash estimate from Statistics Estonia, annual inflation accelerated to 5 percent in February. Additionally, the VAT rate will rise again in July. In Vitsur's view, this will act as a major brake on the economy.

"This is a very significant hindrance. I would add that there are expectations for us to start taxing CO₂ emissions in the transport and household sectors as well, which will lead to further price increases. Estonia already moved toward becoming one of the highest-priced countries in Europe last year and now we are pulling even further ahead by several percentage points. This means our producers will have to compensate for this by improving efficiency. But since investing here is difficult, the big question is how. And on this point, I am much more pessimistic than I am about assessing the current economic situation," Vitsur said.

Inflation is also intensifying wage pressure, which has persisted in a spiral for the past three years. According to the analyst, steps should have been taken three years ago to break out of this cycle, including stabilizing energy prices in the short term.

Vitsur argued that excessive regulations need to be reviewed, but this requires knowledgeable individuals to handle the task. He pointed out that Estonia tends to implement EU regulations as strictly as possible.

"This is something we can certainly reassess. Of course, we cannot simply ignore CO₂ emissions or environmental concerns — that would be neither right nor feasible. But we can adapt these regulations in a reasonable way," he said.

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