Budget, Estonia, EU – Baltic States, Financial Services

OECD doubts that Estonia will be able to save and cut enough to maintain its State budget deficit below 3%.

"This will be a difficult and a painful task; compromises will have to be made," said Andrew Dean, the head of OECD's country overviews unit of the economics department. "Even by cutting the budget in 2009 and 2010, meeting the conditions for the accession to the euro will be a major challenge," he noted.

At the same time, Dean emphasised that accession to the euro area would be a very important objective from the point of view of improving the economic situation in Estonia.

According to Dean, Estonia displayed signs of overheating in 2007 already. He added that the current crisis is particularly difficult because the decline in the global economy that significantly damaged exports coincided with the overheating of the Estonian economy and the decline in domestic consumption caused by it. "It was a shock for everyone," said Dean.

Minister of finance Ivari Padar stated that it is clear that the budget volume needs to be cut back even more in order to comply with the Maastricht criteria. "All the risk scenarios that we have brought to the Government today clearly indicate that the budget needs to be further adjusted this year," said the Estonian minister. He estimated that the Government will again convene to make further cuts at the end of April or in the beginning of May.

OECD expects Estonia's economy to fall by 8% this year, and grow by 5% by 2011 already.