Eesti Pank lowers 2018 economic forecast to 3.5%

The Bank of Estonia has lowered Estonia's 2018 economic growth forecast by 0.7 points to 3.5%, but raised the 2019 forecast by 0.5 points to 3.6%, reports LETA/BNS.

According to the central bank's June forecast, Estonia's gross domestic product is to total 24.8 billion euros this year and the real growth of GDP 3.5%. In December the bank forecast the GDP growth to total 4.2%, it can be seen from the Bank of Estonia's economic forecast for 2018-2020 - writes

According to the fresh forecast, the Estonian economy is to grow 3.6% next year and will total 26.57 billion euros in current prices, while in December the bank forecast the 2019 economic forecast to total 3.1%. In 2020 the real growth is to total 2.5%, which is 0.2 points less than in the December forecast.

It is quite natural for growth to be slower as there have been fewer unused production resources available with which to grow, and investment statistics indicate that new production capacity is only slowly being added. Higher employment has so far helped to offset the lack of investment, and has been made possible by net immigration in recent years, a temporary increase in the working age population, and more active participation in the labor force, though these beneficial influences are fading, the bank said.

Private consumption growth forecast for this year is 4%, which is 1.1%age points less than in the previous forecast. The government sector's consumption is to increase 1.7%, which is 0.4 points less than in the December forecast.

A consequence of the low level of investment by the business sector is that long-term growth in the economy will be slower. Corporate spending on investment as a ratio to value added has for the past three years held at its level of the crisis period, which is below the average for the countries of the European Union. Estonia has also been a bit less attractive for foreign investment. Assuming that funding conditions remain favorable and given that successful business models require investment in new technology, especially when there are labor shortages, capital needs to be built up over the next two years, though the outlook for this is uncertain.

Although economic growth is slowing, the economy will still be running at above its potential level for the next two years. As part of the economic growth has been driven by increased demand, not by the addition of production capacity, the economy is temporarily above its level. Businesses are not able to increase their production volumes consistently at the same rate as demand, and by the end of the forecast horizon growth will slow down.

Estonia's consumer price index is forecast to grow 2.8% in 2018, 2.5% in 2019 and 1.9% in 2020. The unemployment rate is to total 6.9% this year, 8% next year and 8.2% in 2020.

Along with the faster growth of unemployment, employment is to fall faster than before. This year employment is to decrease by 0.1%, next year by 0.4% and the year after that by 0.1%.

The average gross salary is to grow by 7% to 1,302 euros this year, by 6.4% to 1,385 euros next year and by 5.9% to 1,468 euros in 2020.

The danger is greater than before that growth will slow more steeply than forecast because of unexpected events. This could be caused by deterioration in terms of trade and setbacks in foreign markets, where the outlook has become less certain. The threats of barriers to international trade have started to become real, which has increased the probability of battle lines continuing to be drawn and having a major impact on the global economy.

Companies and households are better protected against a deterioration in the economy than they were earlier. Even if the economy should be hit by some unexpected shocks, both companies and households are better prepared as they have built up savings in recent years and their debt burdens are lower, the central bank said.

Read more news of Tallinn on our site.
If you notice an error, highlight the text you want and press Ctrl + Enter to report it to the editor
2 views in january
I recommend
No recommendations yet


Post your comment to communicate and discuss this article.

Even though education is a matter close to the heart of Estonia 200 leader Kristina Kallas, she cannot imagine herself fighting for the post of education minister: ideas can also be realized by someone else. You just took away Postimees’ editor-in-chief. In your opinion, how is the editorial to feel? Lauri [Hussar] had to give the matter thought, and I presume he did. We talked about why he wants to go into politics. Still, to what extent do you imagine wh...
TALLINN – Russia is seeking integration in Estonia only in words, Kalev Stoicescu, researcher at the International Center for Defense and Security (ICDS) who is running on the ticket of the Estonia 200 party in the March 3 general elections, said on Wednesday commenting on the words said on the subject by Russian Foreign Minister Sergey Lavrov.  "Russia is the only neighboring state which does not wish -- due to its own interests -- progress in integration...
Former top centrist Evelyn Sepp admitted that she donated money the origin of which was unknown to her to the Center Party in 2006. The former politician claimed other members also engaged in the practice but refused to name names. Sepp’s confession on ETV investigative journalism program «Pealtnägija» does not come as a total bombshell. She first said that such covert funding of parties is a widespread practice in the aftermath of the Silvergate scandal i...
"In addition to our ongoing programme of passenger vessel renovations, we are also continuing to upgrade and modernise our cargo vessels to ensure that we continue to develop this important part of our business," he noted, adding that the relocation of the company's Estonia-Finland cargo route to Muuga on the Estonian side in October 2017 and the launch of the Smart Port solution in Tallinn's Old City Harbour in spring 2018 both contributed to improved ser...
During the final week of 2018, a total of 2,524 patients with viral upper respiratory infections sought medical attention, 47.5% of whom were children. A total of 210 cases of influenza were laboratory confirmed, nearly twice as many as during the week before, according to Health Board data. Over the past two weeks, the number of flu cases has quadrupled. The majority of these cases were laboratory confirmed at emergency medical departments, from which pat...
I actually think that B1 is too low of a bar for attaining citizenship. You still can't participate in Estonian society on anything other than a superficial level as noted above, so I'm not sure how you can constitute a "citizen" on that basis. Naturally there has to be a high degree of arbitrariness, and that's precisely the point — whilst B1 level might be sufficient in German or French (I understand that it is the benchmark level when applying for citiz...
Following a white Christmas throughout most of Estonia, Wednesday will see sleet and even rain in parts of the country, and temperatures hovering around the freezing point will means slippery road conditions. Early Wednesday morning, many major highways were salted or wet, but some patches were still icy, the Estonian Road Administration said. Eastern parts of the country will see scattered rain or sleet. Temperatures throughout the day will remain around...
Last weekend, Christmas Eve as well as Christmas Day and Boxing Day still ahead means that most chemist's shops are closed for five days in a row. Tallinners can still get hold of prescription as well as over-the-counter drugs in the 5 Tõnismägi St and 19 Vikerlase St shops. As doctors' practices are closed for the holidays as well, people will have to turn to the emergency room of a nearby hospital in case of any more serious health problems. In Tallinn,...
Irene Ilves, the mother of former President Toomas Hendrik Ilves, died on Tuesday aged 91. Irene Ilves was born on 6 January 1927. An Estonian refugee, she raised her family in New Jersey, on the US East Coast. She is survived by two sons, Andres Eerik and Toomas Hendrik, and four grandchildren, Juulia Kristiine, Luukas Kristjan, Kadri Keiu and Hans Hendrik, Mr Ilves wrote on social media on Wednesday, adding that she will be very missed by family and frie...