What he called a cluster crisis in the food industry, including the effects of African swine fever (ASF), inflation and the poor spring and summer weather, has been affecting the whole economy. A turnaround can only come by getting consumption to grow, Raudsepp added.

"For the fourth year we are seeing that in spring the Ministry of Finance's forecast promises economic growth, then in autumn that expectation is lowered again," Raudsepp told "Vikerraadio" Friday morning.

"There is uncertainty about where the crisis caused by African swine fever will develop. This is about major costs; we are also losing time. Once the disease passes, returning to normality will take time, and all contractual relationships and activities will be difficult to restore," the EKI head continued, speaking specifically about meat production.

The crisis is the result of the economic and tax environment, with inflation and tax increases reducing consumers' purchasing power, he said. "Food sales and production volumes have been falling since 2022," he said. "On the other hand, [there is] an emergency caused by weather and swine fever."

This is negatively impacting the economy and leading to job losses, he said.

Agricultural subsidies, if applied by the government, will work as a type of stimulative investment, he went on, adding that the soaring food prices are an important barometer of the cluster crisis too.

"Price puts things in their place, and that is one component of the crisis. Goods from Estonian producers are now falling out of store selections at an accelerated rate. This process has sped up with the end of summer, with the arrival of the breaking point of consumers' purchasing power," Raudsepp noted.

According to Raudsepp, 23 percent of households now say that their monthly income does not cover their increased expenses. At the same point in time in 2024, the figure in the same survey stood at 15 percent and will reach 25 percent by year-end, he went on, while much food and also electricity is being imported, leading to growth in the balance of trade deficit.

"Estonia's negative balance of trade is growing rapidly and food is at the forefront of imported goods," Raudsepp noted. "We also buy electricity in large quantities, where do we get the money to buy all this if we do not produce anything ourselves?"

Even the ongoing discussion about reducing VAT on food has fallen into the blind alley of bickering about "who will then get that money for themselves," Raudsepp said, referring to claims that retailers would simply pocket the difference and food prices would not substantively fall.

The goal, however, of cutting VAT would be to stimulate consumption and lead to its growth, Raudsepp went on.

"It is preferable for the state to collect tax revenues from a growing economy, not by taxing a declining economy more and more," Raudsepp summed up.

The EKI is a government institute whose aim is to analyze and objectively evaluate all aspects of Estonia's economic and business situation, the organization says on its website.

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