HEIDO VITSUR: When it was decided not to support businesses during the energy crisis, this mistake cost us our competitiveness
“We can talk about global economic headwinds all we want, but if we didn’t react adequately to the sudden rise in energy prices two years ago and let inflation rise rapidly, we did our economy a disservice.” , said economist Heido. Vitsur.
According to Heido Vitsuri, the government should have supported entrepreneurs in 2021-22, when energy prices rose, but not doing so was a big mistake and cost us our competitiveness. We still suffer the consequences of the inflation that occurred in that period, which was much higher than the European level.
According to the latest economic forecasts from Eesti Pank (EP), the recession in Estonia will be longer than previously thought. The main reason is the poor state of Estonian export markets and our reduced competitiveness. The Estonian economy is forecast to shrink by 3.5% this year and 0.4% in 2024.
According to Heido Vitsuri, the pessimism expressed by the European Parliament is certainly not a surprise. The decline has been observable for some time, especially in light of the GDP data for the third quarter. Since none of the parameters improved in the 4th quarter, nothing other than continued economic decline can be expected from 2024.
Fewer workers, fewer taxes
If exports are still in constant decline by 20% and new orders are few, entrepreneurs have understood that they have to start laying off workers. The European Parliament’s unemployment forecast for next year talks about taking this recognition into account: almost half of the current level, that is, unemployment will rise to the level of almost 10%.
“As layoffs occur in the real economy, both in construction and manufacturing, next year will be difficult,” said Heido Vitsur. “And in conclusion, it will also be hard for the state, because if there are fewer employees, the revenue from social taxes and income taxes will also decrease.”
So what is the distant background to the predictions for Morni’s EP victory?
According to Vitsur, our competitiveness has been lost precisely because of the excessively high price of energy. We have done nothing to ensure a stable and stable energy supply for people and businesses. First of all for entrepreneurs, because people complain, but entrepreneurs cannot invest, because the problem is broader than the lines that break with every heavy snowfall: the too high and unstable price of electricity.
“We can talk about global economic headwinds all we want, but if we didn’t react adequately to the sudden rise in energy prices two years ago and let inflation rise quickly, very quickly, we did a disservice to our economy,” said Heido Vitsur. “The fact that we did not intervene in the economy, we did not support, was a mistake – but for the real economy only 3-4 months of support were needed. We supported the people: it was nice. But the fact that we did not having supported the economy has cost us dearly. It has cost competitiveness. It has created high price levels, which in turn have forced wages to increase. The result is that it is not possible to buy our products on European markets, where there ‘It’s pressure. There’s no turning back.’
Estonian goods have lost competitiveness
It should be remembered that, compared to 2020, in 2021 the price of electricity increased by 102%. Among the important target markets for local companies, supported companies, for example, Latvia, Lithuania, Finland and Sweden. Countries have reduced grid tariffs, offset renewable energy tariffs and set a cap on the price of energy. We missed everything.
Vitsur added that if we continue on the topic of energy policy, we have not yet realized that relying mainly on wind energy is very expensive. “When there is wind, this type of energy is cheap. If there is no wind the price will skyrocket. If we add the fact that the war starts tomorrow, that won’t help us either.”
“Due to the drought due to the winds this winter, we are paying a high price for energy,” Vitsur added. “The issue isn’t even so much the price of souls, but investors can’t invest in a place where the price of energy is uncertain or fluctuating. They don’t know how much energy costs and they can’t get a loan. Not many will be made investments. You can build a house, but energy-intensive production won’t come here.”
Heido Vitsur is therefore of the opinion that without smarter decisions on energy policy the Estonian economy will continue to suffer for a long time.
2023-12-26 10:09:45
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