EKI survey: Optimism in the economy replaced by moderation

The economic overview of Q4 2021 prepared by the Estonian Institute of Economic Research (EKI) indicates that the former optimism in the economy has been replaced by a more moderate stance, whilst the position in export, investments and private consumption is strong.

64 percent of the experts who responded to the survey consider the overall economic situation to be good whilst 36 percent find that it is satisfactory. The experts also rated investments as favourable when 67 percent considered the situation good and 33 percent found it to be satisfactory. Expectations of private consumption remain high, as the majority or 86 percent of experts rated the current situation as good.

According to Marje Josing, Director of the EKI, the sudden acceleration of inflation is a problem for companies as well as private consumers. "Estonia's inflation in December was the fastest in the eurozone and the rapid increase in input prices deteriorates the competitiveness of companies," said Josing. "The bigger gap in people's security and economic coping is also a concern. Almost 45 percent of the outgoings of lower income families are related to unavoidable expenses. The consumer barometer indicates that such families often have no savings and they spend as much as they earn. They would quickly need economic assistance if the prices of food and housing increased suddenly."

According to Andres Sutt, Minister of Entrepreneurship and Information Technology, the rapid increase in energy and consumer prices has had a negative impact on the security of people and companies. "Government support is aimed at the households that need it the most and the partial compensation of the network charge also helps companies," he added.

"The lack of skilled labour is still the biggest problem for companies when it comes to increasing their business volumes. However, our exporting companies have been successful despite the complicated times and lack of workforce. Proposals for making the recruitment of specialists from abroad easier in sectors where local workforce cannot be found are being prepared in order to address the shortage of skilled labour," said Sutt.

The assessments of the EKI experts for December indicate that in six months the economic situation will be somewhat worse than it is now. However, the economic growth will continue, albeit at a slower rate than last year as a result of the higher reference base.

The biggest problems caused for companies by COVID-19 in December were disruptions in supply chains and, above all, the price increase of production inputs. The absence of employees due to illness or quarantine is also a problem for companies. The six-month forecast made in June turned out to be too optimistic and the impact of corona on companies and the entire supply chain is considerably bigger than anticipated at the time.

The economic growth forecast by the EKI for 2022 is 3 percent and its inflation forecast is 6.5 pe