The prime minister met with a delegation from the IMF

11.09.2002 | 00:00

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Tallinn, Stenbock HouseAugust 9, 2002Prime Minister Siim Kallas met today at Toompea with a delegation from the International Monetary Fund (IMF) lead by Richard Haas, head of the IMF European II Department´s Baltic division. According to Haas, the Estonian economic situation is significantly good, while there are risks related to foreign trade looming on the horizon. At their meeting, Haas and Kallas discussed the current Estonian account deficit. According to Haas, it is not such a definite risk alert in Estonia as it is in some other countries, since Estonia has a steady influx of foreign investments. At the same time he warned that should the deficit not show signs of decreasing, the government should have a definite activity plan to avoid further economic problems. "We are not quite certain how to interpret Estonia´s current account deficit," said Haas. Discussing the supplementary budget issue, Haas mentioned that extraordinary agricultural support should not become an annual expense item since it would burden the state budget. He found it positive that the majority of expenses in the supplementary budget are planned as one-time only, and that the government intends to make reimbursements to different domestic funds like the Ownership Reform Reserve Fund. "It is one additional factor to stabilize the domestic economy," he confirmed.According to Kallas, Estonia will not retreat from the balanced budget requirement, and generally the supplementary budget expenses are one-time allocations. As an example, he mentioned the purchase of the Estonian embassy building in Brussels that also does not greatly affect the domestic economy since the expenditure is made outside of Estonia. Kallas said that Estonian government budgeting has been conservative; he mentioned the lowering of economic growth expectations after the September 11th terrorist attacks on the USA last year as one example. "We lowered our forecasts conservatively, yet economic growth was greater than anticipated, and some of our politicians have blamed the government for planning forecasts too low in order to make a supplementary budget later," said Kallas. Kallas gave Haas a synopsis of potential economic problems in Estonia, highlighting potential overheating of the loan and real estate market. Both think that the overheating risks may be principally realized in the case of further negative developments in Estonia, and that the situation requires continuous attention and potential preemptive steps from the government and the central bank. According to Haas, Estonia should seriously focus on the inconsistent social benefits system and the quality of agricultural support since they pose macroeconomic risks that could get out of control and endanger Estonian economic stability. Daniel VaarikGovernment Press Office

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