Estonian economy expected to grow 3-4 percent a year in next three years

Photo: Raigo Pajula

According to a consensual estimate of analysts interviewed by the Institute of Economic Research (EKI), real growth of Estonia's gross domestic product in 2013-2016 will reach 3-4 percent a year, which is below the long-term average as well as the central bank's growth potential estimate.

The most pessimistic scenario puts annual GDP growth at 2 percent and the most optimistic, at 5 percent, EKI said in its quarterly review of the economy released on Wednesday.

Analysts believe the economy will grow 3.2 percent this year, 3.6 percent in 2014 and 3.7 percent the year after that, and that growth will only reach 4 percent in 2016.

The growth in private consumption is seen outpacing GDP growth by half a percentage point, ranging from 3.6 percent to 4.5 percent during the period. This can be partly explained by the bigger fall in consumption during the economic downturn, but households' increased savings and anticipated loan growth also have to be taken into account, EKI said.  

Consumer prices are expected to rise at an annual rate of 3.4-3.7 percent, which is higher than desired and above the Maastricht criteria but lower than the last three years' average of 4 percent. Analysts predict the fastest price rise for the current year. The inflation forecast for 2014 is 3.4 percent, for 2015 it is 3.6 percent, and for 2016, 3.5 percent.

Unemployment will according to the forecast decrease at a moderate rate during the period, falling to 8 percent by 2016. The jobless rate estimates are 9.3 percent for the current year, 8.7 percent for 2014 and 8.2 percent for 2015.

Export of goods is expected to grow by four billion euros and reach 16.6 billion euros by the end of the four-year period. Individual experts' opinions diverge pretty much, however, ranging from 13.5 billion to 19 billion euros.

Import of goods is seen increasing by 4.6 billion euros, that is, at a slightly faster pace than export. Because of that the trade gap will widen: if preliminary figures for 2012 put the shortfall at 0.8 billion euros, in 2016 the deficit could amount to 1.3 billion euros.

Average gross pay is seen to rise 4.5 percent a year on the average. The analysts' consensus is that wages and salaries will grow in all years of the period and average 1,104 euros in month in 2016. According to the most optimistic scenario monthly pay will average 1,150 euros and the blackest scenario puts the average at 1,030 euros.