Estonian FinMin forecasts 2.7 pct economic growth for 2024

Estonian FinMin forecasts 2.7 pct economic growth for 2024.
Estonian FinMin forecasts 2.7 pct economic growth for 2024. Photo: Mihkel Maripuu

According to the summer economic forecast of the Ministry of Finance, Estonia's economy will grow by 2.7 percent next year, while a 2 percent real decline in the gross domestic product (GDP) is predicted for this year.

Compared to the spring economic forecast, the Ministry of Finance lowered next year's economic growth expectations by 0.3 percentage points and raised this year's economic recession expectations by 0.5 percentage points. In the spring, real GDP growth in 2024 was expected to be 3 percent and real decline in 2023 was estimated at 1.5 percent.

The ministry is forecasting real economic growth of 3 percent in 2025, 2.5 percent in 2026 and 2.2 percent in 2027.

According to the forecast, consumer prices will grow by 9.6 percent this year, while inflation will slow down compared to last year's 19.4 percent increase in the consumer price index. The slowdown in the rise of consumer prices will continue in 2024, but the added tax measures will hold back a stronger slowdown in inflation. Inflation of 4.6 percent is expected next year, 2.5 percent in 2025, 1.7 percent in 2026 and 1.9 percent in 2027.

In the spring, the Ministry of Finance expected an inflation of 9.2 percent this year and 3 percent next year. Thus, the indicators were adjusted upwards by 0.4 and 1.6 percentage points, respectively, in the latest economic forecast.

According to the forecast, the average salary will increase to 1,828 euros this year and to 1,950 euros next year. The real growth of the average salary will be 1.5 percent this year and 1.9 percent next year.

"Salary growth has exceeded expectations and the purchasing power of the average salary will return to growth in the second half of 2023," the ministry said.

The ministry forecasts nominal GDP growth of 7.7 percent this year. For next year, however, the ministry forecasts nominal GDP growth of 6.8 percent, followed by 5.5 percent, 4.8 percent and 4.4 percent growth, respectively, in 2025-2027.

The summer economic and financial forecast will give decision-makers an overview of what is happening in the economy and public finances, as well as future prospects. Based on the forecast, the government will start putting together the next year's state budget. The government must submit the draft state budget for 2024 and the state budget strategy for 2024-2027 to the Riigikogu by the end of September.