OREANDA-NEWS. On August 29, 2007 Eesti Pank's Deputy Governor MARTEN ROSS stressed in his speech held at the conference of heads of Estonia's foreign missions that Estonia's economic slowdown has been progressing according to expectations, although risks to a soft landing have not disappeared, reported the press-centre of Bank of Estonia.

"The greatest danger to a smooth slowdown of the Estonian economy is wage growth surpassing labour productivity growth. This poses a threat to the country's economic expansion in the years to come and prevents inflation from declining," said Ross, adding that in order to minimise risks associated with weakening competitiveness, both employers and employees should maintain realistic expectations as regards wage formation. "It is important to keep wage formation flexible. Pay increases must be directly related to the expected productivity growth in both the enterprise and the economy as a whole", Ross remarked.

In addition, Ross stressed the key role of fiscal policy in the smooth adjustment of the economy. "Our standpoint is that the 2007 fiscal surplus must be on the level comparable to that of 2006 and it is important to refrain from increasing expenditure by a supplementary budget," said Ross, emphasising that in order to ensure economic sustainability, Estonia must continue to pursue conservative fiscal policy.