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International Internet Magazine. Baltic States news & analytics Friday, 19.04.2019, 05:52

Eesti Pank: lasting economic success requires private sector to invest more

BC, Tallinn, 12.04.2018.Print version
Although last year was a good year for the Estonian economy, long-term success would require companies to make substantially more investments than at present, deputy governor of the Bank of Estonia Ulo Kaasik said, cites LETA/BNS.

"Companies have been making investments in recent years, but not enough. The lack of investment has been compensated for by increases in the number of employees," Kaasik said on Thursday at a conference in Parnu.

"This cannot continue for long as 70 percent of the people of working age in Estonia are already employed, which is one of the highest rates in Europe. If we want to catch up with the wealthier countries, more investment by the private sector will be needed," he said.

He added that it would be reasonable given the current phase of the economic cycle for the government to run a budget surplus and to postpone some of its spending. The construction industry is working flat-out and the more the government directs its own spending to construction, the less the private sector will be able to make its own investment in the sector, Kaasik said.

The Estonian economy grew by around 5 percent in 2017 and investment contributed to that growth. General government investment was given a boost by more efficient use of Structural Funds. The general government invested mostly in buildings and facilities and in transport vehicles. Investment by companies benefited from the favorable position of foreign markets and the desire to increase production capacity.

Estonian companies invested a smaller share of their value added than the average for companies across the rest of the euro area. This is not enough if the Estonian economy is to catch up with those of wealthier countries.

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