Estonia's robust economy backed by sound policies

• Pages: 351

Page 351

Sound macroeconomic policies and far-reaching structural reforms have helped Estonia sustain economic growth and rapidly converge toward European Union levels in the 14 years since independence. Largely driven by domestic demand, the economy is continuing to grow robustly, the IMF said in its annual economic review. The country is meeting all of the Maastricht criteria, save for inflation, which has increased since mid-2004 and remains well above the Maastricht limit.

Aiming at early euro adoption, Estonia entered the Exchange Rate Mechanism II in late June 2004, unilaterally maintaining its euro-peg currency board arrangement.

The IMF Executive Board commended Estonia's remarkable progress and considered its economic outlook generally favorable.

Nevertheless, there are signs of overheating, including rapid growth in domestic credit and a large external current account deficit. The Board welcomed the authorities' intention to remain vigilant in monitoring domestic credit and to take measures should the need arise. Although inflation is not seen as a threat to competitiveness, because it is now...