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International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 18:03

Cbank: Estonian economy needs to boost competitiveness

BC, Tallinn, 01.06.2018.Print version
Estonia needs to boost competitiveness to maintain a solid economic growth, and the increasing scarcity of resources is starting to put pressure on economic growth, an economic at the Bank of Estonia, Kaspar Oja, said, cites LETA/BNS.

"Economic growth in the first quarter was slower than short-term forecasts predicted. At the same time the growth was in line with the Bank of Estonia's December forecast projecting a growth of 3.7% for the first quarter," Oja said in the bank's press release.


According to Oja, a deceleration of growth in Europe was broad-based in the first quarter and it has been associated with various factors, such as an extended flu season, strikes, etc. "Estonia's economy is running close to its full potential and an increasing scarcity of resources is starting to put pressure on economic growth. Potential growth in Estonia is estimated at 3%. A sustained output gap may lead to imbalances and increase vulnerabilities in the economy," the economist said.


"To maintain a solid growth, Estonia needs to boost competitiveness. On the demand side, investment was decreasing and the investment-to-GDP ratio fell below 20%, its lowest level since the first quarter of 2010," Oja said.


Growth in exports and private consumption remained subdued as well, the economist said. "Technical factors such as stock change and statistical difference account for a large share of the growth. On a more optimistic note, manufacturing value added outpaced the overall growth rate and the nearly 20% growth in construction reflects an increase in investments," he added.


"The modest growth figures for private consumption may be partly attributable to the fact that rises in excise duties have made estimating private consumption more complex in the short term as it is difficult to calculate the exact decrease in the purchases made by foreigners in Estonia and the increase in those made by Estonians abroad. Increase in the personal tax allowance influenced consumption somewhat less than expected, although the impact of the income tax reform is likely to increase over the next quarters," Oja said.


While figures of the first quarter remained below expectations in many countries, growth is expected to continue at a moderate pace over the coming years, he said. "In Estonia, the growth outlook is supported by favorable monetary and fiscal policies."


The gross domestic product of Estonia grew by 3.6% in the first quarter of 2018, compared to the same period of the previous year, totaling 5.7 billion euros at current prices, Statistics Estonia reported on Thursday.


The seasonally and working-day adjusted GDP declined 0.1% compared to the previous quarter. However, compared to the first quarter of 2017, the seasonally and working-day adjusted GDP grew by 3.8%.






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