Bank of Estonia: Not reasonable to allow state budget to go into deficit

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The Bank of Estonia is the country's central bank. Source: (Martin Dremljuga/ERR)

According to Bank of Estonia Deputy Governor Ülo Kaasik, the current government's plan to allow the state budget to go into a small deficit in the next few years is not the most reasonable measure to encourage economic growth.

According to the country's central bank, economic development is two-sided. Although economic growth has been modest, developments on the labor market have been faster than that, Kaasik said at an economic conference organized by daily Postimees and TARK Law Office.

"The labor market situation doesn't point to a need for the government to change its fiscal policy goals," he said.

According to the deputy governor, it is also worrying when the state increases insecurity. "The state should inject optimism in businesses and this can be done by creating more security in the future," he said.

"In the coming years, no economic growth based on labor can occur in Estonia as the number of people is declining," Kaasik cited. "Our economic growth can come primarily from an increase in productivity."

According to Kaasik, in order to increase productivity, one possibility would be raising the employment of production capacities. "The employment of Estonia's production capacities is lower than in Europe on average," he said, noting that it was difficult to pinpoint specific reasons for this. "There is a connection — when the employment level is lower, the productivity level is also usually lower."

In Estonia, a very large part is played by microenterprises, Kaasik said, adding that Estonia's microenterprises should cooperate more in order to grow their capabilities.

Editor: Aili Vahtla

Source: BNS

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