Country Economic Forecasts > Estonia

Although GDP growth is set to pick up to about 2% this year, it remains heavily dependent on consumer demand, with export recovery tied to Eurozone prospects and investment rising more slowly than previously expected. Investment revival, helped by EU funds, will lift medium-term GDP growth to 4% by 2018, but this represents a peak due to the tightening labour market. Renewed quickening of wage growth in Q1 will tighten the government's resolve to combat inflation through a balanced budget, but additional public investment remains vital for boosting productivity and export diversification.Doubts over Moscow's strategic intentions will constrain investment this year, and the weak Russian economy will delay recovery of export growth until 2017. But the recovering Eurozone should see sustained medium-term export growth, which will assist faster investment in 2017-18. The resulting pick-up in GDP growth will enable higher public spending within the balanced budget framework, ensuring expansion of education and transport infrastructure.