Bank of Estonia chief: I agree with IMF that Estonian economy slowing ({{contentCtrl.commentsTotal}})

President of the Bank of Estonia Madis Müller.
President of the Bank of Estonia Madis Müller. Source: Priit Mürk/ERR

Bank of Estonia governor Madis Müller said he agrees with the International Monetary Fund's assessment of the Estonian economy being in slowdown mode.

Speaking at a joint press conference with finance minster Martin Helme (EKRE) and the IMF's chief of mission to Estonia Cheikh Anta Gueye, where the latter delivered the organization's prognosis of the Estonian economy, Müller said that: "Like the IMF, we at the Bank of Estonia see that the economy is slowing down. There are fewer job exchanges, and companies are complaining about labor shortages."

This should, however, lead to a reduction in inflation, Müller added, according to ERR's online news in Estonian.

Müller also said that it is not the case that the Bank of Estonia always wants to limit spending, but rather it prefers to mitigate negative effects on the populace, so far as fiscal policy goes.

Müller added that Estonia's fiscal policy in recent years has been too slack, and reiterated the stance that making the second pillar of the Estonian pension scheme – employee contributions which up to now have been mandatory – a voluntary option, was a mistake.

In this, the bank also agrees with the IMF.

"[Making the second pillar voluntary] reduces the sustainability of the pension system, which is particularly important in an aging population," Müller said, noting it concerns the financial state of 700,000 people, or over half the population, as well as future savers.

"We see today that second pillar savers have more assets than people with the same characteristics who do not contribute to the second pillar," Müller said, adding that the state should encourage people to save more.

In his presentation, Gueye had spoken of a need for continuing to foster a savings culture in Estonia.

Martin Helme's view

Finance minister Martin Helme (EKRE) also welcomed the broad consensus the government has with the IMF's assessment, second pillar reform aside.

Helme agreed there was little point in running the state budget simply to cover running costs, adding that the government has the fiscal space to invest in infrastructure.

"These are the places where the outward view gives us the courage to pursue government policy," Helme said.

While Helme agreed with some aspects of the IMF's assessment of the pensions system, he noted that second pillar reform was an election promise (from the Isamaa party-ed.) which needed to be honored.

"I also assured the IMF that we would listen very carefully to their recommendations on how to manage risks, because it affects a lot of people, but we have no political opportunity to withdraw from making the second pillar membership voluntary," Helme said.

PPP and highways

Gueye had spoken of another need, for Estonia to make its use of Public-Private Partnerships (PPPs) more efficient, though he welcomed their use.

On being asked by a journalist from commercial channel TV3 whether PPPs might be useful in building four lane highways in Estonia, Gueye said this would depend on whether the investment was the right kind, and/or if it helped to boost productivity.

Gueye noted a need for expertise in the area, something which the IMF would be able to provide help with, he said.

Editor: Andrew Whyte

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