Estonia's deficit reduction to 1.7 percent of gross domestic product last year from 2.7 percent of GDP in 2008 was “a remarkable achievement” and that Estonia will probably keep its budget deficit below the 3 percent limit for euro region members,
Christoph Rosenberg, head of the IMF mission to Estonia said at a news conference in Tallinn.
“This was somewhat based on one-off measures,” Rosenberg said today, according to Bloomberg. “Nevertheless, we believe this can be kept below 3 percent in 2010.”
Estonia aims to be the third east European nation to join the euro region after Slovenia and Slovakia next January. The government’s budget deficit estimate for last year was confirmed by the statistics office last week, showing the Baltic nation met all measurable terms for euro entry.
The former Soviet state has cut its budget at the expense of domestic demand, exacerbating the second-deepest recession in the European Union, to ensure euro adoption by its target date. The government is betting that euro membership will support trade and encourage investment.
“We see that the economy is starting to bottom out,” Rosenberg said. “We see slight growth for this year and slightly higher growth for next year. The future recovery will depend on external sector, from shift from non-tradable sector to tradable.”
Estonia is moving closer to the euro undeterred by the Greek debt crisis, European Commission President Jose Barroso said on March 24. The 10 former communist nations that have joined the EU since 2004 must adopt the euro once they meet conditions that include capping inflation, the deficit and debt.
The Finance Ministers of the 27-member bloc will probably approve Estonia’s entry bid on July 6, Nordea AB analyst Annika Lindblad said last week. Standard & Poor’s Ratings and Fitch Ratings raised their outlooks for the country to stable from negative last month.