Republic of Estonia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Estonia

International Monetary Fund

No 2024/177, IMF Staff Country Reports from International Monetary Fund

Abstract: The 2024 Article IV Consultation with the Republic of Estonia’s highlights that the economy is caught in a prolonged recession. Russia’s war on Ukraine triggered supply side disruptions, shifting up price and cost levels compared to the euro area average and hurting competitiveness. These developments added to longer-standing problems. Led by a rebound of demand in export markets and a broadly supportive policy mix, growth is projected to recover during 2024. Despite the cyclical upswing, however, permanently higher input costs combined with weak productivity growth are expected to leave a scar, weighing adversely on Estonia’s external performance and on potential output. This baseline is uncertain, with risks still skewed to the downside. Greater emphasis should be placed on increasing corporate investment, improving the allocation of labor and capital, enhancing R&D investment and adoption of digital technologies in traditional sectors, while ensuring that real wage growth remains closely aligned with productivity growth. A more ambitious green transition would improve energy security and thereby the long-term sustainability of growth.

Keywords: staff appraisal; IMF staff representative; supplementary budget; TA project; Policy recommendation; Exports; Fiscal stance; Productivity; Output gap; Baltics (search for similar items in EconPapers)
Pages: 72
Date: 2024-06-21
New Economics Papers: this item is included in nep-cis
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