Estonia Bank improved its forecast of economic decline for this year, expecting that the economic slowdown in Estonia will be the lowest among all European countries.
According to the new estimate, Estonia’s GDP will decline by 2.5% this year. This estimate is much better than the 10% drop expected by the bank in June. The June forecast reflected a significant slowdown in economic activity in the country from March to mid-May when the state of emergency was in effect.
If the vaccination is successful, then, according to the regulator, the Estonian economy will be able to return to growth in the period from April to June next year. In this case, GDP at the end of 2021 will grow by 2.9%. At the same time, the Central Bank expects that in 2022 the Estonian budget will remain in deficit.
The expenditure side of the country’s state budget has grown significantly this year, which was caused by the need to stimulate the economy during the coronavirus pandemic. Therefore, the government will have to go to increase the debt burden.