Estonia: The hard work starts to pay off
Overview:
Estonia has displayed remarkable fiscal discipline throughout the global financial crisis. Despite a very deep recession, it has kept its fiscal deficit consistently below the 3% of GDP limit specified by the Maastricht criteria in order to gain EMU entry. This hard work has been rewarded by Estonia winning approval to join the Euro in January 2011. Moreover, the economy is now starting to rebound robustly. Growth is likely to be rather more than expected this year driven by a surge in industrial output and exports. The recovery must broaden to other sectors and prove long-lasting before all the damage caused by the economic recession (such as high unemployment) is erased. However, tight fiscal policy and a fixed exchange rate have not caused lasting deflation. Indeed, rising inflation could soon prove a challenge.