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Estonia Country Risk Report Q4 2018

Estonia Country Risk Report Q4 2018

We believe that growth outperformance relative to the rest of the eurozone is highly likely over the coming years, given the stable domestic political situation and open business environment. Estonia can continue to transition to a higher value-added production and services-based growth model.

Estonia will remain among the most structurally stable countries across emerging markets, in part due to its strong fiscal position. Having fully converged to all major multilateral European institutions, the country will continue to benefit from a robust policy anchor and a high degree of institutional capacity in the long run.

The country's often fractious relationship with neighbouring Russia, undermined by domestic divisions between ethnic Estonians and ethnic Russians, poses the key risk to stability.

Estonia faces a major demographic problem. Declining fertility rates, increasing life expectancies, and continuous and extensive emigration have led to an ageing and shrinking population. In the long run, this will create a host of economic, political and social challenges.

Key Risks

The UK's exit from the EU presents both upside and downside risks to the Estonian economy. On the one hand, it creates opportunities in the form of returning migrants entering the local labour forces. On the other hand, it reduces remittance inflows and could potentially undermine the country's security situation. Besides this, the actions of Russia continue to represent the biggest external threat to Estonia.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Economic Growth In Estonia Losing Momentum
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
TABLE: GDP GROWTH FORECASTS
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS IMPORTS IN 2017
TABLE: TOP 5 GOODS EXPORTS IN 2017
Monetary Policy
ECB Dovish Despite End To QE
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
EUR: Strength Unlikely Despite Tighter Monetary Policy
TABLE: EUROZONE CURRENCY FORECAST
Estonia Country Risk Q4 2018Contents10-Year Forecast
The Estonian Economy To 2027
Trend Growth To Average Lower
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Labour Market To Come At The Forefront Of Estonia's Political Agenda
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Broad-based Stability To Underpin Outlook
Global Macro Outlook
Pressure On EMs Grows, As Do Divergences
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: ESTONIA – MACROECONOMIC DATA & FORECASTS

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