125
Estonia Growth is projected to slow to 3.2% in 2019 and 2.8% in 2020, as the global outlook softens and the domestic economy runs into capacity constraints. Strong growth of real wages and employment will support household consumption. Export growth will decelerate somewhat due to lower global demand and a loss of price competitiveness. Inflation will fall back as temporary factors wane. Current budget plans include new spending on infrastructure, such as broadband Internet, as well as education, health and social welfare. A moderate fiscal consolidation in 2019 is expected, followed by a broadly neutral stance in 2020. Public debt is low, and macroprudential tools have been put in place to damp potential financial excesses. Cases of money-laundering pose risks to the banking system. Growth is driven by domestic demand The expansion continues, fuelled by domestic demand, as consumer confidence increases. Residential investment has picked up, after a housing downturn, and is now making a sizeable contribution to growth. Export growth has held up relatively well, despite a loss of price competitiveness, but imports have been growing faster due to a strong domestic economy and the weakening of the currencies of main trading partners. Employment has risen and unemployment fallen. Capacity constraints are increasingly becoming binding, resulting in labour shortages and strong nominal wage growth, at around 7% a year. Households have increased saving, and high wage growth has so far not been passed through to price inflation. Headline inflation has fallen back to slightly above 2%.
Estonia Growth is strong Y-o-y % changes 10
Price competitiveness has declined Relative unit labour costs
% of labour force 20
Estonia
Unemployment rate →
8
Euro area
18
← Real GDP
Index 2010 = 100 120 115
CEE¹ average
6
16
4
14
2
12
0
10
-2
8
-4
6
-6
2010
2012
2014
2016
2018
2020
4
110 105 0 100 95 90
2010
2012
2014
2016
2018
85
1. Simple average of the Czech Republic, Hungary, Latvia, Lithuania, Poland, the Slovak Republic and Slovenia. Source: OECD Economic Outlook 105 database. StatLink 2 https://doi.org/10.1787/888933934280
OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 1: PRELIMINARY VERSION © OECD 2019