In its economic survey of Estonia, the Organisation for Economic Co-operation and Development said the country had made a ‘solid comeback’ after the global financial crisis. Government debt was very low and the government budget has been close to structural balance in recent years, it highlighted.

But some challenges remained for Estonia to find a steeper, more inclusive and more sustainable path, the OECD said.

The survey suggested that Estonia should ‘create budgetary room to raise spending on active labour market policies, infrastructure and education, as well as to lower labour taxes’.

It said: ‘To this end, improve spending efficiency and prioritisation and phase out tax exemptions, notably the deductibility of mortgage interest payments.’

In the longer-term, the OECD said that Estonia should consider allowing a small deficit in the government budget rule.

OECD secretary general Angel Gurría said now was the time for a ‘new generation’ of reforms to boost productivity and put Estonia on a fast track to full convergence with living standards of the bloc’s highest flyers.