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Effects of the global crisis and euro on Estonia

Ülo Kaasik. Effects of the global crisis and euro on Estonia. Estonia was hit hard by the crisis – global crisis on top of the domestic correction. Confidence fell rapidly due to regional problems, recent events have less implication. Shock on exports have been similar across the region.

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Effects of the global crisis and euro on Estonia

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  1. Ülo Kaasik Effects of the global crisis and euro on Estonia

  2. Estonia was hit hard by the crisis – global crisis on top of the domestic correction

  3. Confidence fell rapidly due to regional problems, recent events have less implication

  4. Shock on exports have been similar across the region

  5. Exports have started to grow along with the global recovery

  6. Still lot of capacity not utilised

  7. Sharp reaction in labour market

  8. Reaction has been sharp in labour market –in terms of employment and wages

  9. Participation rate has stayed high

  10. But unemployment is probably structural

  11. Boom time jobs have vanished

  12. Financial sector has survived it well

  13. Over 60 days overdue loans to total portfolio 14% üle 60 p viivises olevate laenude osakaal 12% 2009 sügisprognoos ( põhistsenaarium ) maksimaalne võimalik suhtarv 10 % kapitaliadekvaatsuse juures 10% 8% 6% 4% 2% 0% 2010 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Non performing loans have stabilised

  14. Banks behaviour is very cautious

  15. Domestic demand is still sluggish and domestic inflation pressures low

  16. 80 60 40 20 0 -20 -40 -60 -80 2005 2006 2007 2008 2009 2010 Consumers Manufact Constr Retail trade Services Confidence indicators are improving

  17. We expect gradual improvement in domestic demand

  18. CAD has reversed, probably cyclical phenomenon

  19. Inflation development driven by foreign prices

  20. Government has reacted sharply

  21. But still some work to do

  22. Some conclusions • Economy and policies have reacted quickly to the crisis. Majority of the adjustment is probely over. • Many challenges still ahead: • What are the implications of the debt crisis in Europe • How to avoid structural unemployment? • Is financial system supporting the recovery enough?

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