Governor of Eesti Pank Madis Müller emphasised at a joint seminar of Eesti Pank and the European Investment Bank (EIB) on Thursday that companies had to invest more in innovation and research if Estonia wants to stay competitive.

“Fewer funds are directed to innovation and digital solutions in Estonia than the European Union average, and this can endanger our international competitiveness in the longer term. It is particularly notable that private sector investment contributes less to innovation. Being competitive with our business environment and the products and services of Estonian firms is extremely important, given that we depend more on exports than most other European countries do. If we want to do well, we need to keep pace with innovation, and ideally to outstrip our competitors, whether that is in developing digital solutions or in greening our economy through climate policy”, he said.

The Estonian current account has been in surplus in recent years, which means that Estonia is no longer borrowing from abroad and as a country is saving more than it is investing. “We need to understand why businesses do not find it profitable enough to make new investments in Estonia. Estonia has had an attractive business environment and has supported investment by having zero corporate income tax on reinvested earnings, but it appears that this is no longer enough. We need to look for additional ways both to attract foreign investors and to encourage local companies to expand their businesses”, he added.

Mr Müller noted that in the current crisis, the primary concern holding back investments is clearly uncertainty. However, a survey by the European investment bank showed that Estonian companies find access to financing to be less of an obstacle to new investments than companies in other European countries. “Further development of the economy and businesses will depend largely on how the crisis plays out. There remains a great deal of uncertainty. This makes it particularly important that the government manage to ensure a stable business environment and give sufficient notice of upcoming changes”, he said.

Madis Müller was speaking on Thursday at an online seminar held jointly by Eesti Pank and the European Investment Bank on investment and funding investment in Estonia. To watch a recording of the seminar, please contact Eesti Pank.

The European Investment Bank (EIB) is a bank that issues long-term loans and is owned by member states of the European Union. It provides funding for investment projects that help to achieve the political goals of the European Union. The results of the EIB survey of Estonia can be found here.

Additional information:
Ingrid Schmuul
Communications officer
Eesti Pank
Tel: 668 0965, 5697 9146

Press enquiries: press@eestipank.ee