IMF sees Estonia deficit above 3 pct/GDP next year

Estonia will need to do more to consolidate its budget next year to keep the deficit at levels required for euro adoption, the International Monetary Fund (IMF) said on Monday.

The government has said it hopes to adopt the single currency in 2011 but a deep recession is hurting its efforts to cap the public sector deficit at 3 percent of gross domestic product (GDP).

'For 2010 all the base line projections show that the deficit will be higher than 3 percent next year,' said Christoph Rosenberg, who headed a mission for regular consultations with Estonia.

He said those looking at Estonia's euro plans should look beyond 2010 and 2011 and it would be important to make important structural changes.

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Authentic design masterpieces Estonian way

In order to get to know Estonian national handicraft and get acquainted with different works of art of Estonian craftsmen, one can visit the newly opened design market which is situated on Rotermanni area and is held every Sunday from the beginning of August. The open-air design market also offers various kinds of original design masterpieces or just some creative works including different kind of stylish handmade jewelry, wooden art, pictures, as well as old-fashioned decorations, hand-knit woolen sweaters with traditional Estonian folk patterns, colorful glassware, original art such as graphic prints or fine ceramics and so on.

While visiting the design market one can see a large choice of traditional and classical favorite souvenirs such as carved wooden beer mugs, fun felt hats, juniper coasters and limestone candle holders, which could be an ideal gift for a foreign friend.

The onlookers can admire glassworks, ceramics, leather goods, quilts, mugs with graphic panorama of Tallinn Old Town, handmade medieval theme dolls, tapestries with Tallinn City and Old Town sights, lead-cast figure of Old Thomas and other items which are created right before your eyes.

The only principal of the design market is that all the works should be handmade by Estonian masters

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“The handicraft and design market gives fine possibility to find something unique. Handicraft is one of the most favorite activities and hobbies of Estonians and it is possible to see the most different works of art in the design market,” said Merilin Parli, the head of handicraft and design market project.

“The purpose of the design market is to introduce to consumers works of the Estonian masters. The needlework market is already held for the third time, but unfortunately not all the people are well informed about it. Taking into consideration the Estonian weather the market will work till the end of September, but I hope that each time buyers for us will be more and more,” Parli added.

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Estonia faces more cuts for euro

Estonia's economy is to drop a worse than expected 14.5 percent this year and further budget cuts will be needed to keep if 2011 euro adoption hopes are to be met, the Finance Ministry said on Thursday.

Like Baltic neighbours Lithuania and Latvia, Estonia's economy has gone into a steep decline after several years of credit-fuelled boom. Though Estonia built up a reserve of funds during the good years, it is still having to hack back the budget to keep a cap on the fiscal deficit.

'Compared with spring, despite the economic contraction, you can see signs of stabilisation,' said Finance Minister Jurgen Ligi.
'However, this means additional decisions are needed to continue to join the euro, if the country can afford the cost of course,' he added in a statement.

The ministry forecast a gross domestic product drop this year of 14.5 percent, worse than the 8.5 percent previously expected. Under a positive scenario, the GDP drop would be 13.6 percent, it said.
'The government sector deficit will on the border of the Maastricht criterion. In addition to the already made decisions for 2009, improvements to the budget of 2.5 billion kroons will need to be found,' the ministry said in a statement.
The ministry saw the 2009 deficit at either 3.2 or 4.2 percent of GDP, above the 3 percent level allowed for countries wanting to adopt the euro. For 2010, it saw a deficit of either 2.1 percent or 2.9 percent, depending on the economic outturn.
Analysts said the government could meet its target.

'It is still possible. The positive scenario sees about 3 billion to cut and the negative scenario is a little more. It is possible,' said SEB analyst Ruta Arumae.
Handelsbanken analyst Gunnar Tersman said that reaching a deficit of 3, 4 or 5 percent of GDP would be an achievement and showed Estonia was making efforts to restrain its deficit.

'It is not that they have to meet the criteria this year, but it shows thay they are very serious about fiscal policy and are one of the better states in the EU,' he said.
'I would not be surprised if they did not meet the exact three percent. They are still performing very well.'
Latvia's budget deficit this year is expected to be about 10 percent of GDP and Lithuania's about 8 percent.
For 2010, the ministry saw GDP dropping 2 percent, slightly better than the 2.5 percent decline expected before and saw growth resuming at 1.5 percent in 2011.

It forecast consumer prices would fall 0.1 percent this year, versus the previous forecast of consumer price inflation of 0.4 percent.
Prime Minister Andrus Ansip was determined to keep to the euro goal.

'I will confirm again: we will hold to the euro course, we have a plan and based on today's situation, I indeed believe that we will join the euro on Jan 1, 2011,' he told reporters after a government meeting.

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