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Strong consumer confidence and a large increase in taxexempt personal income are bound to boost private consumption in 2018, the bank says in the fresh Nordic Outlook.

According to the bank, it is taking a slightly more cautious view than some forecasters because it expects people to reap the full benefits of the reform only in spring 2019 when the tax authorities start to refund overpaid taxes.

SEB is forecasting that private consumption will increase by 4.3% this year, up from 2.2% 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 of 3.2% this year and 2.5% in 2019.

The bank expects Estonia's exports to grow 4.3% this year and 4% in 2019 as a result of the good health of the eurozone economy and Estonia's export partners.

The government's decision to let the budget slide into a slight deficit during the next couple of years has spurred criticism, but in relative terms, Estonian fiscal policy remains very conservative, SEB said.

In the Nordic Outlook published in November the bank forecast Estonia's economy to grow 3.3%.