Today, 15 January, Deputy Governor of Eesti Pank MÄRTEN ROSS spoke at Swedbank's private banking seminar. His presentation was titled "Estonia 2009 - domestic adjustment in economic draughts".
In his speech delivered to Swedbank's private banking customers Ross said the Estonian economy was undergoing two simultaneous and interacting processes. "First of all, we are being impacted by the post-boom need to improve the domestic economic balance. On the other hand, there is the effect of the global economic recession, which originated last autumn, and this has dealt a strong blow to Estonia's export. However, sharply fallen commodity prices have contributed to the inhibition of price rises," said Deputy Governor of Eesti Pank Märten Ross.
According to the central bank's Deputy Governor, the imbalances of the Estonian economy have already remarkably improved. This is shown in the decrease of both trade deficit and domestic price pressures. "At the same time, the direction and extent of the global recession remain unpredictable. It cannot be ruled out that the negative economic developments of our trading partners will last longer than expected. This, inevitably, intensifies the need for vigorous economic adjustment in Estonia in respect of prices, wages and business plans in general," Ross said.
"From the point of view of monetary policy environment the global recession has already brought along a steep lowering of interest rates. The strengthening of demand in the world may also be affected by additional fiscal stimuli provided by major economies," explained Ross, adding that in order to support economic stability in Estonia it is important to continue structural reforms conducive to growth also under the new more adverse conditions. "In addition, Estonia's accession to the euro area as soon as possible would also definitely accelerate growth", he emphasised.
As a precondition for further recovery of economic growth the Deputy Governor stressed the importance of making further changes in the state budget with the aim of achieving fiscal balance in a few years. Here, Ross said, it has to be taken into account that income will be considerably smaller than before and thus expenditure should be cut even more.
