IMF describes wage pressure as biggest threat for Estonia’s outlook

The International Monetary Fund (IMF) finds that the outlook for the Estonian economy is positive and growth will continue in the medium term at close to 3.5%, whereas the main risk for the outlook is wage pressure which is not accompanied by growth in productivity, informs LETA/BNS.

According to the IMF, external risks for Estonia are balanced in the near term. The current growth rates may prove more lasting than expected as consumer confidence and business confidence remain high in the euro area.

The downsides are tensions in trade relations and the United States adopting a protectionist posture.

Domestic risks meanwhile continue to be predominantly negative, the IMF said.

Wage pressure is not accompanied by improvement in productivity, and this may affect the profitability of businesses in the medium term, just like their loan servicing capability, which in its turn would have a negative effect on banks’ loan portfolio.

As regards the real estate market, the IMF finds that continued robust demand may push the prices of dwellings higher still, leaving the banking sector vulnerable to risks.

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