The Commission expects the Estonian economy to grow by 2.8 percent in 2018, an increase of 0.2 percent over the estimate offered in the Commission's winter economic forecast.

Inflation in Estonia is projected to reach 3.3 percent in 2017 and to abate to 2.9 percent in 2018 as global commodity prices stabilize, compared with estimates of 2.8 and 2.7 percent, respectively, in the winter forecast.

The unemployment rate, according to the Commission's new forecast, will hit 7.7 this year and 8.6 percent in 2018 owing to the nationwide work capacity reform underway. The winter forecast, in comparison, predicted rates of 7.9 and 8.7 percent, respectively.

Unemployment is on the rise in Estonia as reforms encourage disability pensioners to re-enter the labor market. Global food and energy prices as well as a significant increase in excise duties are driving up inflation. The fiscal position is projected to turn into a deficit over the forecast horizon, reflecting the loosening of fiscal policy through increased investment, the Commission said.

Wages in Estonia, however, are projected to continue growing relatively rapidly at over five percent in 2017 and 2018.