Mof Summer 2010 Macroeconomic Forecast
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Mof Summer 2010 Macroeconomic Forecast

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Mof Summer 2010 Macroeconomic Forecast Mof Summer 2010 Macroeconomic Forecast Presentation Transcript

  • Estonian Ministry of Finance 2010. Summer Forecast A ugust 25 th 2010
  • Macroeconomic Forecast
    • Economic growth by 2% in 2010 and 3,6% in 2011 is relatively good outcome
    • Inflation 2,6% in 2010 and 2,5% in 2011
    • Economic growth stronger than expected supported by increased competitiveness and external demand
    • Current inflation mainly imported, fruther developments in accordance with economic growth and productivity
    • Employment increase stable, but more restrained than desired
  • Economic growth in 2010Q2
  • 1. Macroeconomic Forecast Andrus Säälik Head of Macroeconomic Policy Department
  • Fundamentals of Forecast
    • Recovery from the crisis in 2010. faster than expected (export, industry)
    • Domestic demand starts to pick up in 2nd half of 2010 supported by investments
    • Consumption courage is increasing
    • In 2010. inflation higher than expected (commodities, bad weather conditions), further developments in accordance with economic growth
    • Uncertainty in respect to 2011. outlook has increased
  • Recovery from crisis is faster
  • 1.1. External environment and trade
  • Source: Eurostat Exports has recovered rapidly in the EU, the growth rate reached almost 40% in the Baltics.
  • Growth of exports has been strong in last months, being affected by the internal readjustments of companies and the pick up of the foreign demand
  • 1.2. Domestic demand
  • Consumers confident in state success
  • Convergence in households’ saving rate
  • Consumption recovering?
  • Upwards trend of VAT
  • 1.3. Labour market and prices
  • 5000 new wage-earners during one quarter
  • Registered unemployment on downward trend since April
  • Unemployment is falling, but the pace is more restrained than desired
  • Mostly foreign factors and severe weather conditions, also increases in indirect taxes are behind the higher inflation
  • Inflation will fluctuate between 2.5–3% in near future, in line with the productivity and economic growth
  • 1.4. Risks
  • Outside Europe qoq growth loosing pace, pessimism is back
  • Risk scenario: exports will grow just one year?
  • Risk scenario: exports will grow just one year?
  • Risks
    • Labour market
      • Improvement mostly due to seasonal factors
      • Economic growth based on increasing productivity – need for new workers?
    • Inflation boosting in short term, 4% at the end of year
      • Several one-off factors and surprises
      • Expectations
      • Price convergence is continuing
    • Export
      • Recovery effect up to 2011
    • Growth expectations in light of Q2 growth
  • Public Finance Sven Kirsipuu Adviser Public Finance and Strategies Department
  • Public Finance keywords in 2010–2014
    • The growth of economic activity increases the tax revenues
    • Requested 2011 budget expenditure exceeded the limit-amounts by 4.8 bln EEK
    • Selling of emmission quotas and associated investments influence the budget position
    • Budget balance by the end of the forecast period
  • Tax revenues exceed the budget by 2.0 bln EEK   2010 budget Spring Forecast Summer Forecast Summer vs Spring Taxes in total 61 767.5 63 096.4 63 757.4 661.0 incl. PIT 3 220.0 3 210.0 3 150.0 -60.0 CIT 2 425.0 3 400.0 3 190.0 -210.0 Social tax 26 970.0 26 600.0 26 600.0 0.0 VAT 19 030.0 19 000.0 19 400.0 400.0 Excise on alcohol 2 330.0 2 540.0 2 600.0 60.0 Excise on tobacco 1 830.0 1 800.0 1 970.0 170.0 Excise on fuel 4 870.0 5 420.0 5 660.0 240.0 Gambling tax 215.0 320.0 307.0 -13.0 Non-tax revenues 22 760.6 23 552.3 23 798.7 246.4
  • One-offs increase the deficit in coming years
  • No structural problem in the budget
  • Tax burden set to decline
  • Estonia still has net assets by the end of 2010
  • Thank you!
  • Main indicators 2009 2010* 2011* 2012* 2013* 2014* Economic growth -14.1 2.0 3.6 4.0 3.8 3.5 GDP in current prices 214.8 218.2 230.4 245.5 261.5 278.3 CPI -0.1 2.6 2.5 2.6 2.7 2.7 Domestic demand -23.9 -0.2 4.3 4.1 4.7 4.6 Export -11.2 15.1 9.0 6.7 7.1 6.5 Employment growth -9.2 -5.0 0.8 1.6 1.8 1.7 Real wage growth -4.5 -3.2 0.1 1.0 1.6 1.5 Unemployment rate 13.8 17.5 15.4 13.6 11.4 9.4 Current account 4.6 4.3 2.3 0.3 -2.1 -4.4
  • Forecast of Estonian economic growth for 2010
  • Forecast of Estonian economic growth for 2011
  • Economic growth in different regions
  • In 2010 foreign demand stronger than expected
  • Estonian exports growth vs developments of main trading partners
  • Spare production capacities’ reserve still there, export orders strong
  • 2010–11: after crisis fast recovery
  • Current account surplus will turn to deficit because of the rise in import volumes and increasing profitability of foreign investments
  • Share of private consumption remains lower
  • Investments presumably recover
  • Employment by sectors
  • Wage decline stopping
  • Average payment by sectors
  • Average payment by sectors (2)
  • Average wage
  • Changes in tax policy– excise duty increases, VAT, state duties. Other administrative changes – electricity, water, gas, heat energy. Other goods and services – close to core inflation (2009-2010 without VAT increase). Contribution to CPI