The economic forecast published today by the Estonian Ministry of Finance is in line with Eesti Pank's estimation that Estonia's rapid economic growth will persist in the years to come. Consumer price growth is expected to remain moderate, whereas meeting the Maastricht inflation criterion is going to be complicated.

Eesti Pank estimates this year's inflation rate to rise above four per cent. The pace of economic growth is similar to that of 2005, reaching above eight per cent. According to Governor of Eesti Pank, Mr Andres Lipstok, there are no threats to price stability, and Estonia's inflation rate is in compliance with the dynamic economic expansion.

Lipstok says that in the coming years the growth of domestic demand is expected to slow, which would have a favourable effect on the balance of exports and imports. The exports of goods and services should be supported by the economic upturn of our foreign trade partners. From the point of view of economic competitiveness, it is essential that Estonia's enterprises continue to increase productivity, keeping it in line with wage growth.

"In order to ensure and strengthen Estonia’s economic reliability, even more prudent economic and fiscal policies must be pursued. I fully support our Minister of Finance, who said at his meeting with the members of the IMF mission that in the context of economic growth surpassing the potential, the state budget should be in a considerable surplus both this and next year," Lipstok emphasised. According to Governor of Eesti Pank, the state budget surplus ought to form two per cent of GDP, i.e., around four billion kroons in both 2006 and 2007.

"The forecast of the Ministry of Finance confirms Eesti Pank’s estimation that in the next months, Estonia is not going to make considerable progress in meeting the Maastricht criterion. Based on the current interpretation of the inflation criterion, it will be complicated to meet the inflation requirement necessary for the adoption of the euro by mid-2007," commented Lipstok.

"Moreover, consumer price growth complicates Estonia's accession to the euro area in 2008 as well. However, the government and the central bank aim to adopt the euro as soon as possible," he added.

Lipstok noted that Estonia's accession to the euro area depends on the inflation level of the countries whose inflation rate serves as the basis for the criterion value as well as on the interpretation of the inflation criterion. Eesti Pank's autumn forecast, which is to be published in November, will provide an evaluation of the further prospects for the adoption of the euro.