Estonia grew faster than most emerging market economies during 2000-07, but it is now in a severe recession. This first edition of OECD's periodic review of Estonia's economy includes chapters covering getting back to a sustainable growth path, fiscal policy, labour market reform, housing policy, and the business environment.
Table of contents:
Executive Summary Assessment and Recommendations Chapter 1. Getting Back to a Sustainable Growth Path is the Key Policy Challenge -The current economic situation is the most challenging since the early 1990s. -Medium-term prospects remain favourable, but hinge on reforms --Challenges ahead - bringing Estonia back onto a high sustainable growth path -Annex 1.A1. A Growth Accounting Exercise for Estonia -Annex 1.A2. A Shock Synchronisation between Estonia and the Euro Area. Chapter 2. Removing the Pro-Cyclical Bias of Fiscal Policy -Trends in fiscal policies and outcomes -Modifying the current fiscal rule - increasing flexibility without jeopardising sustainability Chapter 3. Strengthening Financial Stability while Reducing Distortions in the Housing Market -After a boom, the housing market is experiencing a sharp downturn -High indebtedness has made households vulnerable to adverse shocks -Avenues to reduce households' vulnerability to interest rate increases -Fiscal policies contributing to increased housing demand and house prices -Housing policies to address social imbalances -Annex 3.A1. Explaining House Price Developments in Estonia Chapter 4. Increasing Flexibility and Reducing Segmentation of the Labour Market -The labour market: outcomes and challenges ahead -Making labour market institutions more flexible -Integrating ethnic non-Estonians and foreign workers into the labour market -Annex 4.A1. Model of Reforming Labour Market Institution: Application to Estonia -Annex 4.!2. Current Labour Market Institutions in Estonia Chapter 5. Enhancing the Business Environment to Foster Productivity -Estonia's framework conditions mostly support a well-functioning business environment -E-government plays a key role -Catch-up has been fast, but a gap with the productivity level of advanced OECD countries remains -The tax system could do more to support investment, innovation, and entrepreneurship -Product market regulatios facilitate competition, but some aspects call for further reforms -Effectiveness of policies supporting innovation and entrepreneurship could be enhanced -Private sector development in poorer regions should be encouraged -Summing up