SEB has raised its 2018 economic growth estimate for Estonia by 0.2 percentage points to 3.5 percent, while its 2019 estimate remains at 3 percent.
Strong consumer confidence and a large increase in tax-exempt personal income are bound to boost private consumption in 2018, the bank says in its Nordic Outlook published today Tuesday.
SEB is taking a slightly more cautious view than other forecasters as the bank expects people to reap the full benefits of the income tax reform only in spring 2019, when the Tax Board makes its annual rebate payments.
According to the forecast, private consumption will increase by 4.3 percent this year, up from 2.2 percent in the first three quarters of 2017. Last year private consumption growth was significantly curbed by high inflation, which will affect growth this year as well.
SEB expects HICP inflation to amount to 3.2 percent this year and 2.5 percent in 2019.
The bank also expects Estonia's exports to grow by 4.3 percent this year and 4 percent in 2019 as a result of the good health of the eurozone's economy and the economies of Estonia's export partners.
The government's decision to budget a slight deficit in the next two years has spurred criticism, but in relative terms Estonia's fiscal policy remains very conservative, SEB said.
In its last Nordic Outlook published in November 2016, the bank forecast Estonia's economy to grow by 3.3 percent, 0.2 percent behind the current estimate.
Editor: Dario Cavegn