Estonia: How to Cope with Rising Living Costs

Economic experts in Estonia agree that the country's economic situation is beginning to improve. The most significant upturn is expected in the second half of the year. However, this does not mean that all challenges are behind us.

Cautious Optimism

There is a sense of optimism, but it should be viewed as cautious. Major issues are still apparent to all residents, and Estonia must overcome these hurdles on its path to economic recovery.

Analysis of Living Costs in an Expensive Country

In some countries, the cost of living is so high that it is difficult to find places with prices below the European average. This creates a situation where competition occurs not at the local level but with international online stores.

Impact of Inflation on Pricing

One of the key factors influencing price increases is inflation. Although its rate is decreasing, it remains high compared to neighboring countries like Latvia.

Impact of Tax Policy on Inflation in Estonia

In Lithuania, the recent rise in inflation is partly linked to the country's tax policy, particularly excise duties and electricity prices. Last year, the price level in Estonia reached 95% of the European average. For some goods, prices were even higher: clothing and footwear cost 20% more, and food was 10% more expensive.

The Need to Stimulate Exports

According to recommendations from international organizations, the Estonian state must stimulate exports. This could be one way to balance the economic situation and reduce inflationary pressure on the country's economy.

Analysis of the Complex Economic Situation in Export Markets

Export markets are currently experiencing tough times due to a lack of demand. This makes it difficult to assess competitiveness, especially given the wage growth observed over the last twenty years. Despite successful penetration into the Finnish market, high inflation could negatively impact retail trade, as turnover is not increasing.

Impact of Inflation and Pension Assets on the Economy

High inflation levels can lead to stagnation in retail trade since overall turnover does not show growth. Additional pressure on the economy comes from the emergence of significant funds from the second pension pillar. These factors together have a complex impact on the economic situation, requiring thorough analysis and strategic planning to maintain stability and development.

Changes in Consumer Confidence and Industrial Production

In the past, people feared high inflation, leading to unjustified spending of resources. However, recently there has been some growth in consumer confidence. Nevertheless, this level of confidence is still not sufficient for making significant purchases.

Recovery of Consumer Activity

Consumer power has started to gradually increase over the past two months. Despite this, the overall level of consumer activity remains relatively low.

Transformations in the Manufacturing Sector

The most significant change is the transformation in the manufacturing sector. This indicates potential positive shifts in the economy that could affect the consumer market in the future.

Trends in Wholesale Trade

The sector that faced the most problems is seeing the arrival of new significant orders. Although our position is not entirely satisfactory, we observe that positive trends in wholesale trade continue. It is hard to point to any indicator that has worsened; however, growth remains very modest.

Comparison with European Countries

With this level of growth, we lag behind only the Netherlands and Malta.

Impact of COVID-19 on Businesses

Businesses with experience operating under COVID-19 conditions have decided to retain the accumulated knowledge and adapt to new realities.

Changes in the Labor Market

According to recent data, the labor market is seeing an increase in unemployment. However, experts do not predict a significant wave of layoffs in the near future.

Situation in Various Sectors

The construction and service sectors continue to show a need for labor, indicating stability in these sectors within the labor market.