Page 9 - Central & Southeast Outlook 2020

What appears relatively certain is the continued strength of consumer spending, the main factor behind growth in recent years. Consumption is forecast to remain healthy on the back of employment growth and rising wages in 2020, although it is expected to weaken somehow - expanding 2.8% compared to 3.5% in 2019 - as is the economy as a whole.
“The economy cannot run at full power for a long time without losing competitiveness since rising wage costs will force companies to raise prices. It is notable that the assessment of companies of their own competitiveness has already started to deteriorate,” Estonia’s central bank, Eesti Pank, wrote in December.
Sector-wise, the largest contributor to GDP expansion in 2019 was the information and communications technology (ICT) sector, the main driver of economic growth for a decade now. There is little to indicate that will change in 2020 as Tallinn is determined to maintain its position of a tech-savvy nation, although it is going to find itself in competition with Baltic neighbours Latvia and especially Lithuania, which have also recognised the power of tech innovation.
Estonian inflation is expected to decelerate in 2020 to slightly above 2%, with SEB forecasting price growth of 2%, the European Commission 2.1%, and the Estonian government assuming 2.2% in the 2020 budget bill.
Labour market will remain largely unchanged in 2020, although the unemployment rate is forecast to rise slightly to 5.2%-5.8%. “Should manufacturers be hit by a strong headwind in 2020, companies will be more likely to reduce their number of employees. However, we believe that a rapid increase in unemployment is not so likely, since many companies still seem willing to hire,” according to SEB.
“Unemployment will rise in the coming years as the economy will cool, while more people than before will enter the labour market but not all of them will find work. Labour market activity will be increased by the gradual rise in the retirement age, improving health, and the general growth in the level of wages, which encourages people to work,” predicted Eesti Pank in December.
Comparison of economic forecasts (source: ministry of finance)
9​ CESE Outlook 2020​ ​ ​www.intellinews.com