Nr. 12-2011 Published monthly by:
The Swedish Chamber of Commerce
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Closing the books 2009, outlook 2010! A likely 2009 scenario for an Estonian employee was that there were plenty of people willing to do his or hers job for 20% or 30% less in salary. Estonia's average salary levels fell significantly last year, a phenomenon not noted in the country since 1993.

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> Here we are. What's next?
> Euro
Even though, cutting wages wasn't enough. Many companies in Estonia switched to part time work schedules or had to lay off labour. Lower wages and unemployment has led to decreased domestic demand and consumer prices fell last year.

- Consumer prices have been lowering since the summer and Estonia met the Maastricht inflation criterion in November, said Eesti Pank – Estonia's Central Bank - in their December 2009 report which, to a large extent, focused on the potential Estonian Euro-introduction January 1st, 2011. From now on, the dynamics of inflation will mostly depend on the fluctuation of oil prices in the global market and on tax amendments in Estonia.

- Europe is now on its way out of the economical crisis, said the EU-Commission in a November statement. The growth will however return slowly and unemployment will remain on high levels.

In his September opening speech of the fall session of Riigikogu - the Estonian Parliament - President Toomas Hendrik Ilves put 2010 in focus:

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President Ilves and Ene Ergma
- When the State budget is based on wishful thinking and long outdated pre-election promises, but not reality, it is not only the Government's mishandled job but also the Riigikogu's, said the President in a sharp address to the Members of the Parliament.

Ene Ergma, Speaker of the Riigikogu and Vice Chairman of the Pro Patria and Res Publica Union (IRL) – one part of Estonia's current Government coalition – followed up on the budget issue and called in her remarks on lawmakers to refrain from populism in the handling of the 2010 State budget:

- The reality is such that we cannot spend what we don't have, said Ene Ergma.

Eesti Pank underlines in their December 2009 report that it is the main responsibility of the Government to ensure the credibility and sustainability of Estonia's economic policy in a longer term and the Central Bank said it considers it necessary to take further steps in addition to the recent budget cuts to improve Estonia's budget balance.

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Marje Josing

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Heido Vitsur

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Raul Eamets

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Targo Raus

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Priit Perens
High unemployment levels, cost-cutting, euro aspirations, and low purchase power are critical key issues for Estonia during 2010 according to several of the country's economical analysts in a New Year poll:

- Consumer prices will not fall as notably in 2010 as they did in 2009. However, in spite of tax and excise duties, no-one can increase prices because incomes are not growing, purchasing power is low, jobless rate is high, domestic demand is down and inflation is zero, said Marje Josing, head of EKI – the Estonian Institute of Economic Research.

- Domestic demand is likely to decline further because of growing unemployment and falling incomes. Exporting companies will be facing considerable price pressure and growing protectionism in key markets as governments protect their own producers, said Heido Vitsur, an economical analyst.

- These are difficult times for everyone, but those who are first on a market are able to increase their market share and will become winners in the long perspective. My advice is to assess market risks conservatively and not to be too greedy. Unemployment will remain high 2010 and there will be plenty of workforces available. Generally, it will take several years before we will be back on the levels of 2008 level, said economist Raul Eamets.

- The key question is whether we will see recovery in consumer confidence and consumption. Companies that are inefficient will be in danger. Another keyword will be the euro since it would greatly improve confidence in the local financial sector. Much will depend on whether the Government manages to stick to the euro criteria, said Targo Raus, chairman of the Estonian bank Bigbank AS.

- The overall situation in the economy has stabilized and much will now depend on whether Estonia will succeed in joining the euro zone. Euro would make our economic environment notably more stable and more attractive for investors, said Priit Perens, CEO of Swedbank Eesti.

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