IMF Staff Country Reports

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

June 21, 2024

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Format: Chicago

International Monetary Fund. European Dept. "Republic of Estonia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Estonia", IMF Staff Country Reports 2024, 177 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400278303.002

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Summary

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.

Subject: Exports, Fiscal policy, Fiscal stance, International trade, Output gap, Production, Productivity

Keywords: Baltics, Exports, Fiscal stance, IMF staff representative, Output gap, Policy recommendation, Productivity, Staff appraisal, Supplementary budget, TA project

Publication Details

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