Economical overview
Estonia's liberal market economy is dominated
by a service sector with advanced IT technology. With
successful exports, the economy has recovered after
repeated crises. The budget is in balance and central
government debt is the lowest in the EU. However,
security concerns in the region affect the economy and
parts of the country suffer from unemployment and
poverty.
The open Estonian economy is sensitive to changes in
the outside world, especially with important trading
partners. The Ukraine crisis in 2014 and the EU's
subsequent sanctions against the Moscow government (see
Foreign Policy and Defense) curtailed Estonia's
agricultural exports to Russia and reduced Russian oil
trade via Estonia. A deteriorating Russian economy also
reduced the number of Russian tourists visiting Estonia.
The weak Finnish economy also had a negative impact on
Estonia.
-
Countryaah.com:
Major imports by Estonia, covering a full list of top products imported by the country and trade value for each product category.
But despite these problems, Estonia's economy as a
whole is stable. Unemployment is one third of the record
level during the financial crisis of 2008-2010, when
many Estonians emigrated to other EU countries to find
work. Although many of them have returned to Estonia,
some industries find it difficult to find qualified
personnel, and labor costs increase more than
productivity.
The service sector has grown sharply since
independence in 1991 and now accounts for more than
two-thirds of the country's gross domestic product
(GDP). Industry accounts for a quarter of GDP, while
agriculture has declined in importance.
-
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including EST which represents the country of Estonia. Check findjobdescriptions to learn more about Estonia.
Dramatic economic development
Technological innovation is the hallmark of business.
Estonia is one of Europe's most digitized communities
with more government services online than any other EU
country. Companies can be started without paper forms,
driving licenses can be renewed online, 98 percent of
income declarations are submitted online and Estonia was
the first in the world with voting via the Internet in
parliamentary elections.
The transformation of the economy has been
breathtaking. At the time of the outbreak of the Second
World War in 1939, Estonia was an agricultural society,
whose inhabitants had about the same standard of living
as the Finns. During the Soviet era (1944–1991), Estonia
was industrialized and became one of the richest Soviet
republics, but it still fell far behind the neighboring
countries in the Nordic countries due to the rigid
state-controlled economic system.
The transition to market economy after the
dissolution of the Soviet Union in 1991 led to an
economic race (see Modern History). Exports fell,
industry was knocked out, subsidies were abolished and
free prices led to soaring inflation. Estonia adopted
its own currency in 1992, tied it to the German soil and
thus slowed inflation.
Trade barriers were abolished and foreign trade was
increasingly directed to the west. Small and
medium-sized companies were quickly privatized, the
state telecommunications company long been owned by
Telia and the largest banks by Swedbank and SEB.
However, privatization of land, real estate, the energy
sector and the railways has been problematic. The
electricity market was deregulated in 2013.
High unemployment in the Northeast
Since the 1990s, Estonia has had a unit tax, known as
flat tax, which has been gradually reduced to 20 percent
for companies as well as private individuals. Reinvested
company profits are tax-free and no payroll tax is
levied on the lowest incomes. In 2017, the tax-free
level was raised and high-income earners lost deductions
in what is similar to progressive tax (see also Current
policy).
While Tallinn was experiencing a boom during the
economic transformation, the countryside has lost jobs,
and young people have emigrated to cities or to other EU
countries. Unemployment has been highest in the resorts
surrounding the abandoned Soviet industrial complexes in
northeastern Estonia.
But Estonia has succeeded better financially than any
other former Soviet republic. A key has been the
transformation of the business sector from large-scale
to small and medium-sized companies, which have received
investments primarily from Sweden and Finland and who
have been able to export to Europe.
Record growth during the first decade of the 2000s
was largely driven by loan-financed consumption that led
to overheating and the financial crisis with shrinking
GDP, hard cuts and record high unemployment.
After a strong recovery in the export sector, the
economy turned upwards and Estonia could move to the
euro in 2011. Currency exchange was followed by rising
inflation, while exports continued to perform well.
After 2011, growth slowed to one or a few percent
annually. Estonia has the EU's lowest government debt
relative to GDP (9.5 percent in 2016). The informal
sector of the economy is estimated at around one-seventh
of GDP.
FACTS - FINANCE
GDP per person
US $ 22,928 (2018)
Total GDP
US $ 30 285 million (2018)
GDP growth
3.9 percent (2018)
Agriculture's share of GDP
2.2 percent (2018)
Manufacturing industry's share of GDP
13.4 percent (2018)
The service sector's share of GDP
59.9 percent (2018)
Inflation
2.5 percent (2019)
Government debt's share of GDP
8.3 percent (2018)
Currency
Euro
2010
October
New Social Democratic leader
The opposition party The Social Democrats elect 36-year-old Sven Mikser as
new party leader. He aims to win the 2015 election.
Enrich Swedish owned factory in bankruptcy
The Swedish-owned textile factory Krenholm in Narva goes bankrupt after 150
years of operation, including as one of the Soviet Union's largest industries.
July
Estonia qualifies for the euro
The EU finance ministers declare that the Estonian economy has met the
requirements for membership in the euro zone.
April
Boost for the economy
The economy turns in the second quarter, GDP starts to grow again and
unemployment falls.
February
Record high unemployment
In the first quarter, unemployment reaches 19.8 percent, the highest figure
since independence in 1991.
|