FRANKFURT (MNI) – Estonia’s economy has recovered well from the
2008-2009 financial crisis but remains volatile and could use a more
counter-cyclical fiscal policy to guard against both future bubbles and
headwinds to growth, the OECD said in a report released Monday.
The OECD forecast that growth in Estonia will decline sharply to
2.2% this year from 8.3% in 2011, before recovering to 3.6% in 2013.
“Important downside risks” stem from a worsening Eurozone crisis, which
could also weaken demand from Estonia’s Nordic trading partners.
The OECD said tighter fiscal policy, including spending caps to
limit excesses in boom years, could help reduce Estonia’s history of
volatility, limiting bubbles and allowing increased spending through
automatic stabilizers if another downturn hits the country.
“It is in good times that we prepare for future storms, which is
why Estonia should begin implementing reforms today to make it even more
resilient to future shocks,” said OECD Secretary-General Angel Gurria in
a statement. “Reducing the considerable volatility that Estonia has
experienced is key to ensuring sustainable growth and well-being over
the long term.”
The OECD called for improved supervision to guard against financial
excesses as investment flows back into the country – a very likely
proposition for the Eurozone’s youngest member if the continent’s debt
crisis begins to ease.
“Decisive policy adjustment will be needed to keep imbalances in
check when confidence in the euro area financial markets improves and
Estonia, with its euro membership, very low level of public debt and
high potential growth rates, is seen as an attractive investment
destination,” the OECD said in its report.
— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com —
[TOPICS: M$X$$$,MGX$$$,M$$CR$,MI$$$$]
