Estonia: Fiscal policy to remain tight
Real GDP is projected to fall by 14.4% this year, to broadly stabilise in 2010 and to recover in 2011, when growth of 3.9% is expected. This projection depends largely on developments in major export markets, on the speed with which resources are reallocated toward expanding export activities and on the country’s ability to attract renewed foreign direct investment inflows to the export sector as the recovery takes hold.
Maintaining the currency board with a view to adopting the euro as soon as possible remains the primary objective of economic policy. The need to meet the 3% of GDP Maastricht criterion implies that fiscal policy will remain very tight. External assessments of the credibility of Estonia’s economic policies–and, in particular, of its prospects for euro accession–will also be critical for foreign direct investment flows and credit conditions.
©OECD Observer 2010