•  Financing new investment through state bonds could well prove inefficient and harmful for the Estonian economy as a whole, even if the investments are in good projects. The low unemployment and rapid wage rises that we see at the moment  2  BIS central bankers’ speeches  would cause a large part of the extra money gained from the emission of state bonds to be lost, as infrastructure projects would cost much more than before. Large state construction projects that can only be temporary in nature would also cause economic and social problems in Estonia, because once the large projects finish, a great number of those working on them would find themselves unemployed, having left jobs in other sectors. •  It must be understood that Estonia already profits from the purchases of bonds by the central banks of the euro area. Financial markets act as a series of communicating vessels, so that when interest rates in one area fall, the effect is passed on to other areas. The lower interest rates in the euro area mean that Estonian companies and households can borrow more cheaply, and were it necessary the Estonian state could also borrow more cheaply. If easier financing conditions spur on the European economy, Estonian exporters will be among the winners, and this is the goal towards which the bond purchase programme is striving.
The Estonian economy Looking more closely at the Estonian economy, it can be seen that the growth in Estonia in 2014 came primarily from the domestic market. •  Domestic consumption was lifted by rising employment, falling unemployment, and strong wage growth and a simultaneous fall in prices. The economy grew faster in 2014 than in 2013, but it should be remembered that no return to the growth rates seen in the boom years of the last decade is to be expected. •  It may be hard to get used to the idea of lower growth rates, but economic truths cannot be denied. The Estonian economy and Estonian demographics are in a different phase of development now, and long-term sustainable growth is notably lower at 3–4%. Consumer price inflation in Estonia fell below zero in June 2014 for the first time since the crisis. Four years ago prices fell across a wide range of goods and services, but last year the fall in prices was mainly caused by cheaper energy and food. Eesti Pank is not forecasting any rise in prices this year, but rising wages will put upward pressure on the prices of domestic goods and services. One reason for the rapidly rising labour costs has been the decline in the working age population, but faster growth in wages than in productivity could endanger the competitiveness of the Estonian economy in the longer term.