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Country Report Estonia July 2011

  • Publication Date:July 2011
  • Publisher:EIU
  • Product Type: Report
  • Pages:25

Country Report Estonia July 2011

Outlook for 2011-15

  • Since the election in March 2011, a centre-right coalition of the Reform Party and the Pro Patria-Res Publica Union (IRL) has a parliamentary majority. Policy disputes could test the coalition, and it may not survive for a full term.
  • Political relations with Russia will remain tense, which will have an adverse impact on Estonia's oil transit business.
  • A broad political consensus exists on the need for tight fiscal management. The budget deficit is expected to remain well below the EU-mandated limit of 3% of GDP in 2011-13, before returning to surplus in 2014-15.
  • Net exports and inventory rebuilding produced real GDP growth of 3.1% in 2010, following two years of economic contraction. Growth will strengthen in 2011-15, averaging 4.2% annually.
  • Rising food and oil prices are expected to raise inflation to an average of 4.8% in 2011. Inflation will then slow to an average of 3.2% per year in 2012-15 as global commodity prices ease.
  • Estonia adopted the euro in January 2011. There is a risk that euro zone interest rates could prove too low for Estonia's transition economy, resulting in higher than expected consumer price inflation.
  • The current account will remain in surplus in 2011. However, reviving domestic demand and a deteriorating income balance will cause the surplus to erode in 2011-12, prompting a return to deficit in 2013-15.

Monthly review

  • The opposition Centre Party has nominated Indrek Tarand, an independent member of the European Parliament (MEP), for the presidential election due in August. However, the incumbent, Toomas Hendrik Ilves, is likely to win.
  • The European Commission has approved the government's medium-term fiscal plans, although it expressed some concern over the high level of social security contributions for low- and medium-wage earners.
  • The Bank of Estonia (BoE, the central bank) has revised up its forecast for real GDP growth in 2011, to 6.3%, although it has warned households not to run down their savings and called on businesses to exercise wage restraint.
  • Revised data show that real GDP rose by 8.5% year on year in the first quarter, with private consumption and investment spending both continuing to recover. However, net exports were a drag on overall growth.
  • In January-March the current account recorded its first quarterly deficit for two years, largely owing to a rise in income debits as foreign-owned firms returned to profitability.

Source: Country Report

This report covers the following industry codes:
SIC Code: 15;53
NAICS Code: 23;44

  • Highlights
    • Outlook for 2011-15: Political stability
    • Outlook for 2011-15: Election watch
    • Outlook for 2011-15: International relations
    • Outlook for 2011-15: Policy trends
    • Outlook for 2011-15: Fiscal policy
    • Outlook for 2011-15: Monetary policy
    • Outlook for 2011-15: International assumptions
    • Outlook for 2011-15: Economic growth
    • Outlook for 2011-15: Inflation
    • Outlook for 2011-15: Exchange rates
    • Outlook for 2011-15: External sector
    • Outlook for 2011-15: Forecast summary
    • The political scene: Centre Party nominates an independent for presidency
    • Economic policy: EU gives positive assessment of Estonia's economic policy
    • Economic policy: BoE raises growth forecast, but warns against old mistakes
    • Economic performance: Real GDP rises by 8.5% year on year in the first quarter
    • Economic performance: The construction sector shows signs of recovery
    • Economic performance: The current account moves into deficit
    • Data and charts: Annual data and forecast
    • Data and charts: Quarterly data
    • Data and charts: Monthly data
    • Data and charts: Annual trends charts
    • Data and charts: Monthly trends charts
    • Data and charts: Comparative economic indicators
    • Basic data
    • Political structure
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