According to a fresh forecast of the Organisation for Economic Co-operation and Development (OECD), Estonia’s economic growth is projected to reach 3.5 percent in 2019, before slowing down to 2.3 percent in 2020.
OECD estimated that the economy continues its expansion with relatively broad-based economic growth. Strong household and business confidence is supporting private consumption. Residential investment has picked up following a housing downturn, and now makes a sizable contribution to growth. Robust foreign demand has supported export growth.
However, economic growth is predicted to slow down in 2020 due to weakening of external demand. Increasing real wages will support robust private consumption growth. Investment is set to pick up, supported by strong business confidence and the recovering housing market. Inflation will remain at a high level, sustained by further tightening of the labour market, OECD’s report said.
The government budget is projected to be in surplus during the projection period – that is until the end of 2020 – while the public debt-to-GDP ratio will remain among the lowest in the OECD. While procyclical fiscal policy should be avoided, there is space to let fiscal policy play a more active role to boost job creation, invest in infrastructure, and mitigate environmental concerns – according to the report.