Estonia (10) -- Analyses -- 2009

More about the Risk of Budget Deficit

27.08.2009

In a press statement accompanying the forecast, Finance Minister Jurgen Ligi said there was cause for optimism despite the figure. Unemployment is set to rise to 14.4 per cent in 2009 and 16.8 per cent in 2010, the ministry said. Speaking at a government press conference shortly after the release of the data, Prime Minister Andrus Ansip said he did not think the situation would be as bad as predicted by the Finance Ministry and stressed that Estonia must keep its sights on adopting the euro by January 1, 2011. "For us to not join the euro something terrible has to happen," Ansip said. Officials at Estonia's central bank said the country could meet the Maastricht inflation criterion for euro adoption on inflation by the end of this year but needed to work harder on reducing its budget deficit. Ansip responded by saying a further 2.8 billion kroons (240 million dollars) need to be saved in order to reduce the deficit to the 3-per-cent of gross-domestic-product (GDP) threshold allowed by Maastricht. Estonia's year-on-year GDP declined 15.1 per cent in the first quarter of 2009 and an estimated 16.6 per cent in the second quarter. After a decade-long boom fuelled by cheap credit and a housing market bubble, the small Baltic state of 1.3 million people is wrestling with one of the European Union's deepest recessions.

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