Abstract
Effectively addressing low productivity growth and risks to competitiveness requires a three-pronged approach: (i) making growth promotion more effective through oversight of programs by a dedicated productivity unit in the Prime Ministry, better calibrating programs to company's needs, incentivizing take-up, and scaling-up selected programs; (ii) re-anchoring wage developments in fundamentals by moderating government and minimum wage policies and mobilizing additional labor resources for the private sector, including through faster reduction of government employment; and (iii) social security contribution cuts to provide relief from pressures on profitability.
Fund Relations
(As of November 30, 2016)
Membership Status: Joined: May 26, 1992; Article VIII
| General Resources Account | ||
| SDR Million | Percent Quota | |
| Quota | 243.6 | 100.00 |
| Fund holdings of currency | 193.98 | 79.63 |
| Reserve Tranche Position | 49.63 | 20.37 |
| SDR Department | ||
| SDR Million | Percent Allocation | |
| Net cumulative allocation | 61.97 | 100.00 |
| Holdings | 24.63 | 39.74 |
| General Resources Account | ||
| SDR Million | Percent Quota | |
| Quota | 243.6 | 100.00 |
| Fund holdings of currency | 193.98 | 79.63 |
| Reserve Tranche Position | 49.63 | 20.37 |
| SDR Department | ||
| SDR Million | Percent Allocation | |
| Net cumulative allocation | 61.97 | 100.00 |
| Holdings | 24.63 | 39.74 |
Outstanding Purchases and Loans: None
Latest Financial Arrangements
In millions of SDR
| Type | Approval Date | Expiration Date | Amount Approved | Amount Drawn |
|---|---|---|---|---|
| Stand-by | 03/01/2000 | 08/31/2001 | 29.34 | 0.00 |
| Stand-By | 12/17/1997 | 03/16/1999 | 16.10 | 0.00 |
| EFF | 07/29/1996 | 08/28/1997 | 13.95 | 0.00 |
| Type | Approval Date | Expiration Date | Amount Approved | Amount Drawn |
|---|---|---|---|---|
| Stand-by | 03/01/2000 | 08/31/2001 | 29.34 | 0.00 |
| Stand-By | 12/17/1997 | 03/16/1999 | 16.10 | 0.00 |
| EFF | 07/29/1996 | 08/28/1997 | 13.95 | 0.00 |
Projected Payments to Fund: None
Implementation of HIPC Initiative: Not applicable.
Implementation of MDRI Assistance: Not applicable.
Implementation of CCR Assistance: Not applicable.
Exchange Arrangements: As of January 1, 2011, Estonia’s currency is the euro, which floats freely and independently against other currencies.
Estonia has accepted the obligations under Article VIII, Sections 2(a), 3 and 4 of the Fund’s Articles of Agreement, and maintains an exchange system free of multiple currency practices and restrictions on the making of payments and transfers for current international transactions, except for those measures imposed for security reasons in accordance with Regulations of the Council of the European Union, as notified to the Executive Board in accordance with Decision No. 144-(52/51). An updated and comprehensive list of all EU restrictions can be found at: http://ec.europa.eu/external_relations/cfsp/sanctions/measures.htm
Article IV Consultation: Estonia is on the 12-month consultation cycle. The last Article IV consultation was concluded on December 14, 2015 on a LOT basis.
FSAP Participation and ROSCs: A review under the Financial Sector Assessment Program (FSAP) was completed at the time of the 2000 Article IV Consultation. Further Reports on Observance of Standards and Codes (ROSC) modules were discussed in the 2001 Article IV Consultations and updated during the 2002 Consultation. A FAD mission concluded a fiscal transparency ROSC in January 2009 and an FSAP update was completed in February 2009.
Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT): MONEYVAL’s report on the 4th round assessment of Estonia adopted in September 2014, which is a follow-up round on the 2003 Financial Action Task Force (FATF) standard, highlighted the authorities’ progress in strengthening the AML/CFT legal and supervisory frameworks, specifically development of a risk-based approach to determine priorities for AML/CFT activities, amendments to the financing of terrorism offence, and the establishment of the Economic Crime Bureau. The report notes some remaining deficiencies, in particular with respect to the sanctioning regime for AML/CFT breaches and the beneficial ownership identification of legal persons. The authorities are addressing these issues, including by preparing amendments to the penal code to allow for “administrative sanctions.” They are also working on ensuring compatibility of the widespread use of information technology and AML/CFT requirements. Regulation has been issued with respect to the e-Residency program, namely with regards to customers’ identification for non-face-to-face opening of bank accounts. As the e-residency program is in its early stages, it will be important to follow up on appropriate safeguards that should be put in place to ensure integrity of the program and limit the potential for abuse. Estonia issued its first regular follow-up report to MONEYVAL in September 2016 and was invited to seek removal from the follow-up process not later than September 2018.
Technical Assistance: The following table summarizes the technical assistance missions provided by the Fund to Estonia since 2000.
Republic of Estonia: Technical Assistance from the Fund, 2000–16
Republic of Estonia: Technical Assistance from the Fund, 2000–16
| Department | Issue | Action | Date | Counterpart |
| FAD | Pension reform | Mission | April 2000 | Ministries of Finance and Social Affairs |
| MAE | Banking Supervision | Staff Visit | December 2000 | Bank of Estonia |
| FAD | Tax Policy | Mission | March 2001 | Ministry of Finance |
| INS | Financial Markets | Training | September 2002 | Bank of Estonia |
| FAD | Medium-term Budget | Technical Assistance | December 2003 | Ministry of Finance |
| FAD | Tax Reform | Technical Assistance | February 2005 | Ministry of Finance |
| FAD | Revenue Administration | Technical Assistance | December 2013 | Ministry of Finance |
Republic of Estonia: Technical Assistance from the Fund, 2000–16
| Department | Issue | Action | Date | Counterpart |
| FAD | Pension reform | Mission | April 2000 | Ministries of Finance and Social Affairs |
| MAE | Banking Supervision | Staff Visit | December 2000 | Bank of Estonia |
| FAD | Tax Policy | Mission | March 2001 | Ministry of Finance |
| INS | Financial Markets | Training | September 2002 | Bank of Estonia |
| FAD | Medium-term Budget | Technical Assistance | December 2003 | Ministry of Finance |
| FAD | Tax Reform | Technical Assistance | February 2005 | Ministry of Finance |
| FAD | Revenue Administration | Technical Assistance | December 2013 | Ministry of Finance |
Statistical Issues
General: Estonia’s data provision to the Fund is adequate for surveillance purposes. A May 2001 data ROSC mission found that the quality of macroeconomic statistics was generally good. The 2009 fiscal transparency ROSC indicated that Estonia now meets nearly all of the requirements of the transparency code, and approached best international practice in some areas. Estonia subscribed to the SDDS on September 30, 1998, with metadata posted on the DSSB on January 27, 1999, and met SDDS specifications on March 30, 2000. The latest (2010) annual observance report for Estonia for the SDDS was posted on the Fund’s website in May 2011: (http://dsbb.imf.org/images/pdfs/AnnualReports/2010/EST_SDDS_AR2010.pdf) SDDS webpage for EST: http://dsbb.imf.org/Pages/SDDS/CtyCtgList.aspx?ctycode=EST
National Accounts: The national accounts are compiled by Statistics Estonia (SE) in accordance with the guidelines of the European System of Accounts 2010 (ESA 2010). Quarterly GDP estimates at current and at constant prices are compiled using the production, income and expenditure approaches. The annual and the quarterly national accounts are compiled at previous year prices and chain-linked to 2010, using double deflation. As of September 2011, data are compiled on the basis of the new version of classification of activities EMTAK 2008.
However, there is room to improve the quality of national account statistics. Early releases are often subject to large subsequent revisions, statistical discrepancies between headline GDP and its expenditure components tend to be sizable, and indirect taxes minus subsidies in the production accounts sometimes make implausibly large growth contributions. All this complicates economic analysis.
The authorities plan to address these issues by implementing a number of methodological upgrades suggested by the 2016 Article IV Consultation mission. These include: (i) more timely compilation of supply-and-use tables; (ii) use of volume indexes as the primary source for all real indirect taxes minus subsidies rather than partly deriving them by deflating nominal values; (iii) relying more on direct measures of volumes in estimating real gross value added generated by real estate activities; (iv) carrying forward input-output ratios in volume terms rather than in value terms when calculating value added by economic activity for non-financial corporations; and (v) integrating the estimation of gross fixed capital formation with the production and imports of capital goods and services. The authorities are working toward implementation in time for submitting revised national accounts statistics to Eurostat by September 2017.
Public Finance: Fiscal data are published by the Ministry of Finance (MoF), while historical data are also available on Statistics Estonia’s website. Monthly central government data are disseminated with a lag of up to 25 days after the end of the month. This data provides detailed revenue breakdown, but expenditure breakdown is not available. Quarterly data on foreign loans and guarantees by the central government are published in Estonian with a monthly lag. The Ministry is using one of its two allowed SDDS flexibility options on the timeliness of monthly central government operations data, and disseminate these data on the National Summary Data page. Comprehensive annual data on central and general government operations (accrual basis) are compiled according to the ESA2010 methodology. They are also reported in the GFS Yearbook. These data include a statement of operations and the government balance sheet, including data on financial assets and liabilities, both domestic and foreign. Quarterly data for the general government are included in the International Finance Statistics.
Monetary and Financial Statistics: The Bank of Estonia (BoE) compiles and reports monetary and financial statistics consistent with the IMF’s Monetary and Financial Statistics Manual. Aggregate financial data are compiled by the BoE and reported on a monthly basis. The majority of statistics are disseminated on the Bank of Estonia’s webpage on the 17th banking day after the end of the reporting period. Data for individual banks are also available on a quarterly basis since 2008Q1 on the Financial Supervision Authority’s webpage. Estonia also regularly provides requested Financial Soundness Indicators.
External Sector: Quarterly balance of payments, external debt, and international investment position (IIP) data are compiled by the BoE consistent with the Balance of Payments Manual sixth edition (BMP6). Daily exchange rate data are available with a one working day lag. Monthly import/export data are available with a two-month lag. The Data Template on International Reserves and Foreign Currency Liquidity is disseminated monthly according to the operational guidelines and is hyperlinked to the Fund’s DSBB.
Dissemination of Statistics: The Estonian authorities disseminate a range of economic statistics, with a significant amount of data are available on the Internet:
metadata for data categories defined by the Special Data Dissemination Standard are posted on the IMF’s DSBB (http://dsbb.imf.org);
the Bank of Estonia website (http://www.eestipank.info/frontpage/en/) provides data on monetary statistics, balance of payments, IIP, external debt and other main economic indicators;
the Statistics Estonia website (http://www.stat.ee/en) provides information on economic and social development indicators;
the Ministry of Finance homepage (http://www.fin.ee/?lang=ee) includes information on the government’s annual multi-year State Budget Strategy, as well as information and data on the national budget, and government finance statistics (deficit, debt, financial assets).
Republic of Estonia: Table of Common Indicators Required for Surveillance
As of October 31, 2016
Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Not Available (NA).
Reflects the assessment provided in the data ROSC published on November 6, 2001, and based on the findings of the respective missions that took place during May 10–18, 2001 for the dataset corresponding to the variable in each row. For fiscal data, also takes account of the 2009 Fiscal Transparency ROSC. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).
Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Republic of Estonia: Table of Common Indicators Required for Surveillance
As of October 31, 2016
| Date of latest observation | Date received | Frequency of Data6 | Frequency of Reporting6 | Frequency of publication6 | Memo Items: | ||
|---|---|---|---|---|---|---|---|
| Data Quality— Methodological soundness7 | Data Quality—Accuracy and reliability8 | ||||||
| Exchange Rates | December 15, 2016 | December 15, 2016 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | November 2016 | December 2016 | M | M | M | ||
| Reserve/Base Money | October 2016 | November 2016 | M | M | M | O, LO, LO, LO | O, O, O, NA |
| Broad Money | October 2016 | November 2016 | M | M | M | ||
| Central Bank Balance Sheet | October 2016 | November 2016 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | October 2016 | November 2016 | M | M | M | ||
| Interest Rates2 | October 2016 | November 2016 | M | M | M | ||
| Consumer Price Index | November 2016 | December 2016 | M | M | M | O, O, O, O | LO, LO, O, LO |
| Revenue, Expenditure, Balance and Composition of Financing3—General Government4 | Q3/2016 | December 2016 | Q | Q | Q | LO, LO, O, O | LO, LO, O, NO |
| Revenue, Expenditure, Balance and Composition of Financing3—Central Government | Q3/2016 | December 2016 | M | M | M | ||
| Stocks of Central Government and Central Government-Guaranteed Debt5 | Q3/2016 | December 2016 | Q | Q | Q | ||
| External Current Account Balance | Q3/2016 | December 2016 | Q | Q | Q | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | September 2016 | December 2016 | M | M | M | ||
| GDP/GNP | Q3/2016 | December 2016 | Q | Q | Q | O, O, O, LO | LO, LO, LO, LNO |
| Gross External Debt | Q3/2016 | December 2016 | Q | Q | Q | ||
| International Investment Position9 | Q3/2016 | December 2016 | Q | Q | Q | ||
Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Not Available (NA).
Reflects the assessment provided in the data ROSC published on November 6, 2001, and based on the findings of the respective missions that took place during May 10–18, 2001 for the dataset corresponding to the variable in each row. For fiscal data, also takes account of the 2009 Fiscal Transparency ROSC. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).
Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.
Republic of Estonia: Table of Common Indicators Required for Surveillance
As of October 31, 2016
| Date of latest observation | Date received | Frequency of Data6 | Frequency of Reporting6 | Frequency of publication6 | Memo Items: | ||
|---|---|---|---|---|---|---|---|
| Data Quality— Methodological soundness7 | Data Quality—Accuracy and reliability8 | ||||||
| Exchange Rates | December 15, 2016 | December 15, 2016 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | November 2016 | December 2016 | M | M | M | ||
| Reserve/Base Money | October 2016 | November 2016 | M | M | M | O, LO, LO, LO | O, O, O, NA |
| Broad Money | October 2016 | November 2016 | M | M | M | ||
| Central Bank Balance Sheet | October 2016 | November 2016 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | October 2016 | November 2016 | M | M | M | ||
| Interest Rates2 | October 2016 | November 2016 | M | M | M | ||
| Consumer Price Index | November 2016 | December 2016 | M | M | M | O, O, O, O | LO, LO, O, LO |
| Revenue, Expenditure, Balance and Composition of Financing3—General Government4 | Q3/2016 | December 2016 | Q | Q | Q | LO, LO, O, O | LO, LO, O, NO |
| Revenue, Expenditure, Balance and Composition of Financing3—Central Government | Q3/2016 | December 2016 | M | M | M | ||
| Stocks of Central Government and Central Government-Guaranteed Debt5 | Q3/2016 | December 2016 | Q | Q | Q | ||
| External Current Account Balance | Q3/2016 | December 2016 | Q | Q | Q | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | September 2016 | December 2016 | M | M | M | ||
| GDP/GNP | Q3/2016 | December 2016 | Q | Q | Q | O, O, O, LO | LO, LO, LO, LNO |
| Gross External Debt | Q3/2016 | December 2016 | Q | Q | Q | ||
| International Investment Position9 | Q3/2016 | December 2016 | Q | Q | Q | ||
Any reserve assets that are pledged of otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.
Foreign, domestic bank and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition.
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Not Available (NA).
Reflects the assessment provided in the data ROSC published on November 6, 2001, and based on the findings of the respective missions that took place during May 10–18, 2001 for the dataset corresponding to the variable in each row. For fiscal data, also takes account of the 2009 Fiscal Transparency ROSC. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).
Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation, and revision studies.
Includes external gross financial asset and liability positions vis-à-vis nonresidents.