OECD Economic Surveys: Estonia 2011
The 2011 edition of OECD's periodic economic survey of Estonia's economy. This edition includes chapters covering emerging from the recessions, fiscal policy, public sector spending efficiency, and making the most of globalisation. It finds that Estonia continues to show a remarkable determination in policy making. It has established business-friendly regulation, avoided fiscal deterioration during the crisis and made it into the euro area despite being hit by an accumulation of external shocks. Nevertheless, it has not fully reaped the benefits of globalisation.
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Assessment and recommendations
The Estonian economy went through an extreme cycle of record-breaking growth up to 2007 and a precipitous decline in 2008 and 2009. Boosted by foreign demand and increased competitiveness, the economy has bottomed out, and is now generating some growth again. Unemployment is still high but positive inflation has already returned after a short interval of mild deflation. Unsustainable current account deficits have been corrected, although this improvement has not yet been tested by a solid recovery of domestic demand. This Survey focuses on the legacy of this major recession and the challenges going forward in the form of: the risk of a steep increase in structural unemployment; a high level of non-performing loans; the macroeconomic policy challenge of avoiding another boom-bust cycle in the course of euro adoption; securing the efficient use of public resources; and making the most out of globalisation. In order to keep the economy on a sustainable growth path in the future, work should be carried out towards developing new macro-prudential tools tailored to Estonia’s small open economy so as to better deal with a situation of excessive credit growth.
Also available in: French
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