Märten Ross: structural economic adjustment provides good growth prospects

On Thursday Eesti Pank's Deputy Governor Märten Ross gave ambassadors to Estonia in foreign countries an overview of the economic situation in Estonia, saying that if economic flexibility is supported and further steps are taken to ensure regular fiscal consolidation, the country will have good growth prospects in a new economic cycle.

Märten Ross explained in his presentation that massive support packages provided by large industrial countries in the global economic crisis have, on the one hand, helped support short-term growth, but on the other hand, this means they have partly taken over private-sector debt and supported the boom-time economic structure by augmenting the public debt burden.

"Short-time fiscal stimulus does not ensure lasting economic growth, since the crisis that has hit the world reflects also earlier excessive debts and drawbacks in the economic structure. Although near future seems to be more optimistic than early spring, there will be no point in speaking about a steady pick-up in growth if these drawbacks are not eliminated," said Ross.

The deputy Governor added that with our key export markets having contracted much more than expected, it is remarkable that Estonia's first half-year economic developments have been in line with spring forecasts. "Rapid adjustment in such difficult circumstances without a substantial increase in public debt gives proof of the flexibility of our economy and allows for anticipating that we will have good growth prospects in the next growth cycle," Ross noted.

Deputy Governor Ross made his presentation at the Ministry of Foreign Affairs speaking to ambassadors to Estonia in foreign countries and to the management of the ministry.