Country Report Estonia 2nd Quarter 2015

Country Report Estonia 2nd Quarter 2015


Outlook for 2015-19



  • Following the parliamentary election on March 1st 2015, the centre-right Reform Party was returned to office in a three-party coalition government with the Social Democratic Party (SDE) and Pro Patria-Res Publica Union (IRL).
  • The Economist Intelligence Unit expects broad policy continuity, although political stability may be compromised by the increased parliamentary presence of the Centre Party and the Conservative People's Party (EKRE).
  • Estonia will remain fiscally conservative, although the state budget surplus of 0.6% of GDP in 2014 is likely to fall in 2015 as public spending increases. Government debt is extremely low by EU standards, at around 10% of GDP.
  • Russia's takeover of Crimea in March 2014 will have a lasting effect on NATO's stance towards the country, and security will remain at the top of Estonia's political agenda for some time.
  • Private consumption growth accelerated in the final three months of 2014, and full-year growth was stronger than expected, at 2.1% year on year. Consumer spending will remain a key economic driver in 2015.
  • The current account is estimated to have come close to balance in 2014. We expect the external gap to widen again over the forecast period owing to rising profit repatriation and a boost to imports from the domestic recovery.


Review



  • The liberal Reform Party won the largest share of the vote in the 2015 election with a campaign that focused on security issues in response to rising tensions with Russia. It also emerged with the most seats, albeit short of a majority.
  • Support for Reform, the SDE and the IRL was also lower than in the last election in 2011, while support for the pro-Russophone Centre Party ticked higher.
  • Losses suffered by some of the main political parties reflected a surge in support for two smaller parties, which passed the parliamentary threshold. This has resulted in a more fragmented parliament than in the previous term.
  • Preliminary data show that in the first quarter of 2015 real GDP growth slowed to 1.2% year on year, from 3% in the fourth quarter of 2014.
  • The euro weakened sharply against the US dollar as the European Central Bank (ECB) began its bond buying programme, approaching a 12-year low of US$1.06:EUR1 in April. It had rebounded to around US$1.14:EUR1 by May 18th.
  • The deflation rate eased in April. Consumer prices (national measure) fell by 0.1% year on year, after an annual average decline of 0.9% in January-March.


Country Report Estonia 2nd Quarter 2015
Highlights
Outlook for 2015-19: Political stability
Outlook for 2015-19: Election watch
Outlook for 2015-19: International relations
Outlook for 2015-19: Policy trends
Outlook for 2015-19: Fiscal policy
Outlook for 2015-19: Monetary policy
Outlook for 2015-19: International assumptions
Outlook for 2015-19: Economic growth
Outlook for 2015-19: Inflation
Outlook for 2015-19: Exchange rates
Outlook for 2015-19: External sector
Outlook for 2015-19: Forecast summary
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