Estonian economy on the rocks: look to Lithuania?
For a long time Estonia had the strongest economy among the Baltic states. But it has been in recession since 2022 whereas neighbouring Lithuania's economy is experiencing 3.5 percent growth. The downturn is probably related to interest rate hikes which have a bigger impact on private individuals and companies in Estonia because they have taken out more loans. But commentators see other reasons in play.
Cut taxes and spending and privatise
Postimees prescribes radical economic measures to get out of the recession:
“Estonian industry and exports can't bring in as much money as the Estonian state can spend. So it is important to pinpoint the areas where the state can freeze or postpone spending now. ... Postimees recommends that the government look at what the Lithuanians have done or what the Argentinians are doing. And use the tried-and-tested wisdom of economic recovery: cut taxes and government spending and privatise. Do all the things we did in the early 1990s that brought success. The rules of the economy have not changed since then.”
Slow growth is better
In Eesti Päevaleht, economics expert Heido Vitsur analyses the different approaches of Estonia's friends:
“The fact that Lithuania is doing better than us in the current crisis should come as no surprise. After all, Lithuania also emerged from the financial crisis with fewer scratches and has embarked on a growth trajectory that has put the country on a fairly straight upward curve in terms of stable GDP per capita, which in 2021 was at our 2014-2015 level and has been above ours ever since, although we also continued to grow. ... Lithuania and Estonia have pursued broadly similar goals, but Estonia has been more liberal, faster and more radical in its approach. ... Lithuania has been slower and more cautious.”
Dogged by dogmatic approach to national debt
Estonia is taking a misguided approach to tackling the recession, argues Nerijus Mačiulis, chief economist at a Swedish bank based in Lithuania, in Verslo žinios:
“Instead of investing in renewables and infrastructure or taking measures to promote business investment and exports, Estonia is doing exactly what economic textbooks and the EU's experiences of recent years warn against: implementing fiscal consolidation and trying to quickly reduce the budget deficit. Instead of using [the low level of national debt as] a strength and taking out loans to boost the economy in the short term, the country is taking the opposite path. ... The dogmatic approach to public debt, once Estonia's pride and joy, has now brought the country to its knees.”