Filled with pride for the economic development of our country over the past decade, we must now concentrate more on the future. Estonia’s goal is not only the sustainable economic growth target of 5.5-6 per cent per annum but also the preparedness to join the European Union and to make maximum use of the opening opportunities. What should we then focus on especially? B.1  Challenges facing Estonian economy on its way to the European Union - overall economic policy stance  Estonian economy is already strongly integrated into the European economic area. From the perspective of the central bank I would like to refer to the clear convergence of the interest rate fluctuations and inflation cycles in Estonia and the European Union. The share of current and future EU member states in Estonia’s export is about 81%. In 1994-2001 Estonia’s export to the European Union increased on the average 25% per annum. Our exports to the European Union have steadily grown quicker than imports from the European Union. It means that we have been steadily increasing our market share in the European Union - although it is small. The export structure also characterises our competitiveness - exported goods reflect changes that have taken place in the economy. Our traditional export items are timber, textile and foodstuffs, but also, for example, parts and components of electric motors, cables, mobile phones, antennae and the like.
I am positive that, like in the banking sector, the society will benefit from this. It will result in more efficient production, lower prices, better service quality and curb the power of the monopolistic producers. To date, as in the early 1990s, we again face the question of what is the right fiscal policy. Of course, today this problem is raised in a slightly different way. But, in essence, it is the same question - what fiscal policy shall ensure the stable development of the Estonian economy within the fixed exchange rate regime and as part of the euro area. I shall return to this question towards the end of my presentation. Thus the economic policy key issues we are facing in the beginning of the 21st century resemble in many aspects the problems we tried to resolve in the beginning of 1990s. We have achieved progress in finding solutions to some of the problems, others have remained unresolved. One thing is clear - undue postponement of tough issues is no good to anybody. If we want to be treated as equal partners in the European Union, if we want to sustain the rapid growth rate and  2  BIS Review 51/2002  growing income level, we must tackle these problems with similar resolution and energy we did 10 years ago. B. Challenges facing Estonian economy on its way to the European Union - internal policy  So - what are today’s and tomorrow’s challenges facing Estonian economy?