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2019/03/28 / Erste Group Research

Estonia Macro Outlook: eGovernment and public debt champion

Growth of Estonian economy remained strong in 2018 at 3.5%, supported by solid domestic demand. Due to extremely low public debt (8% of GDP in 2018), there are hardly any government bonds available for institutional investors.

The Estonian economy reached the peak of the cycle in 2017, when it expanded by 4.9% y/y, with the strongest contribution to growth coming from investments. Gross fixed capital formation accelerated to 12.5% y/y in 2017, the fastest pace in five years. The strong acceleration of growth was attributed to an increase in EU-funded investment and large one-off projects.

Despite strong nominal wage growth in 2018, inflation remained under control and has even been declining in recent months. Inflation stood below 2% y/y in February 2019, due to lower transportation and communication costs as well as the sluggish increase in food prices.

The debt to GDP ratio in Estonia is by far the lowest in the EU. According to preliminary data from Statistic Estonia, the debt stood at 8% of GDP in 2018, while the budget balance recorded a deficit of 0.5% of GDP. Due to such a favorable fiscal situation, the government has not issued any bonds for 15 years.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focus-
Currency in focus-
Sector in focus-


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