According to preliminary data from Statistics Estonia published Friday, the Estonian general government deficit was 1.7 per cent of gross domestic product in 2009 and gross debt stood at 7.2 per cent of GDP. The deficit thus remained well within the limits set out in the Maastricht Treaty, clearing the way for Estonia to adopt the euro in January 2011.
SEB’s economists say the data shouldn't come as a surprise to the market as a couple of weeks ago the Estonian finance minister said their preliminary calculations pointed at a deficit of 1.7 per cent of GDP.
“Although the outcome was as expected, this means the last uncertainty about the budget criterion has disappeared regarding Estonia's efforts joining the euro zone in January 2011,” says Mikael Johansson, head of SEB’s Eastern European research.
He says Estonia is likely to fulfil all the Maastricht criteria, including the one of price stability, in the coming evaluation by the European Central Bank and the European Commission, expected in late spring.
Estonia has a good track record in public sector finances, the budget deficit has exceeded three per cent of GDP only once in the past 15 years (in 1999), which increases its chances of euro zone accession.
Already in December 2009 SEB raised the probability for Estonia adopting the euro in January 2011 from earlier 50-50 to above 50 per cent. In the bank’s biannual report Eastern European Outlook, published this week, SEB lifted its estimate to 90 per cent chance of euro zone accession.