Analytics, Budget, Estonia, Financial Services, Inflation, Taxation

Head of the IMF delegation Alexander Hoffmeister who summed up on Monday at a press conference their visit that lasted for 1.5 weeks stated that the firm budgetary policy that helped Estonia into the euro area must continue: a budget with surplus must be achieved, positive supplementary budgets have to be avoided and pre-crisis reserves have to be restored.

He added that if steps have to be made in the name of budgetary balance, “raising VAT and environment and property taxes could be considered.”

Hoffmeister said that the Estonian economy has done better than expected and the IMF upgraded the economic growth forecast for next year to 3.5-4%.

IMF forecast that inflation will continue accelerating in Estonia in 2011, LETA/Postimees Online reports.

The main reason for acceleration of inflation is higher prices of food and fuel at the world market, IMF said in its evaluation on Estonia’s economy.

IMF estimated that exports will continue enlivening the Estonian economy next year but the economic growth will remain below the average of the boom years since domestic demand is curbed by higher debt burden of people, slow increase of incomes and double digit unemployment level.

The risk that Estonian economy’s progress may be poorer than forecast has increased, for example due to the increased instability at money markets.

IMF delegation has been since December 2 in Estonia at its annual visit.