1291170
Estonian (official) 68.5%, Russian 29.6%, Ukrainian 0.6%, other 1.2%, unspecified 0.1% (2011 est.)
TALLINN (capital) 391,000 (2015)
- Conventional long form
- Republic of Estonia
- Conventional short form
- Estonia
- Local long form
- Eesti Vabariik
- Local short form
- Eesti
parliamentary republic
- Name
- Tallinn
- Geographic coordinates
- 59 26 N, 24 43 E
- Time difference
- UTC+2 (7 hours ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, begins last Sunday in March; ends last Sunday in October
accepts compulsory ICJ jurisdiction with reservations; accepts ICCt jurisdiction
Estonia, a member of the EU since 2004 and the euro zone since 2011, has a modern market-based economy and one of the higher per capita income levels in Central Europe and the Baltic region, but its economy is highly dependent on trade, leaving it vulnerable to external shocks. Estonia's successive governments have pursued a free market, pro-business economic agenda, and sound fiscal policies that have resulted in balanced budgets and low public debt.
- Inflation
- 0.149%
- Total tax rate (% of commercial profits)
- 48.7%
- Real Interest Rate
- 2.5%
- Manufacturing, value added (% of GDP)
- 15.755%
- Current Account Balance
- US$ 616,874,395
- Labor Force, Total
- 683,221
- Employment in Agriculture
- 3.89%
- Employment in Industry
- 30.60%
- Employment in Services
- 65.30%
- Unemployment Rate
- 6.91%
- Imports of goods and services
- US$ 17,498,427,894
- Exports of goods and services
- US$ 18,415,379,210
- Total Merchandise Trade
- 121.53%
- FDI, net inflows
- US$ 715,034,631
- Commercial Service Exports
- US$ 6,058,329,044
grain, potatoes, vegetables; livestock and dairy products; fish
food, engineering, electronics, wood and wood products, textiles; information technology, telecommunications
- Commodities
- machinery and electrical equipment 30%, food products and beverages 9%, mineral fuels 6%, wood and wood products 14%, articles of base metals 7%, furniture and bedding 11%, vehicles and parts 3%, chemicals 4% (2016 est.)
- Partners
- Sweden 18.8%, Finland 16%, Latvia 10.4%, Russia 6.7%, Lithuania 5.9%, Germany 5.2%, Norway 4.1% (2015)
- Commodities
- machinery and electrical equipment 28%, mineral fuels 11%, food and food products 10%, vehicles 9%, chemical products 8%, metals 8% (2015 est.)
- Partners
- Finland 14.5%, Germany 11%, Lithuania 9%, Sweden 8.5%, Latvia 8.3%, Poland 7.4%, Russia 6.1%, Netherlands 5.5%, China 4.8% (2015)
- Country Risk Rating
- A2
- The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.
- Business Climate Rating
- A1
- The business environment is very good. Corporate financial information is available and reliable. Debt collection is efficient. Institutional quality is very good. Intercompany transactions run smoothly in environments rated A1.
- Balanced public accounts and low level of debt
- Membership of the Eurozone and the OECD
- Close trading, financial, and cultural links with Scandinavia
- Virtual energy self-sufficiency thanks to oil shale
- Growth of high added value sectors (electronics, IT services)
- Very favorable business climate
- Digitization of administrative procedures
- Flexible economic policy
- Small open economy
- Declining active population
- Drop in competitiveness and profitability: labor costs rising faster than productivity
- Lack of overland connections with the rest of the European Union
- Electronic sector dependent on the imports of a single Swedish company
- Eastern mostly Russian-speaking regions lagging behind
After two years of subdued economic growth, because of the collapse of the Russian market and the impact on public spending of the interruption in European funding between two programs, activity is expected to accelerate in 2017. Household consumption (53% of GDP) will continue to be the main growth driver. The increase in pensioner benefits and family allowances, rising employment, higher wages resulting from a decline in the economically active population and another increase in the minimum wage are expected to offset the hike in indirect taxes on alcohol, tobacco, fuel and the accommodation services. With the return of European funding, public infrastructure investment will continue its recovery, as will private investment in equipment because of the high production capacity utilization rate in response to strong external demand, which absorbs 70% of industrial production. Moreover, businesses are enjoying tax exemption on their reinvested profits. Exporters finally digested the impact of the Russian recession and counter-sanctions. Dairy products, fish and alcohol, which Russia was fond of, have found substitute markets, in Scandinavia, but also outside Europe, helped by the depreciation of the euro. Wood, unprocessed wood or as wooden parts for housing construction, furniture and bedding have found buyers in Denmark and Sweden but could be hit by the depreciation of UK sterling. The Swedish company, Ericsson, continues to buy Estonian telecommunications equipment. Dwindling numbers of Russian and Finnish tourists are to a large extent offset by higher numbers of German, Lithuanian, Norwegian and Asian visitors. In contrast, rail and road transport is suffering from the drop in equipment transshipment to Russia, especially with Russia favoring its own ports.
The new government team is not likely to significantly alter the excellent position of the public finances. Higher current spending and the continued increase in defense spending will only result in a small deficit financed by reserves which, moreover, exceed the amount of debt.
The trade deficit (4.3% of GDP in 2015) is broadly offset by the surplus on services, especially IT, technology or freight forwarding services (8.4% of GDP). Dividend repatriation by Swedish, Finnish and Dutch investors, strongly represented in the retail, real estate, finance and industrial sectors, are only slightly above the returns on Estonian investments abroad. Expatriates' remittances equal those of foreign workers in Estonia. European structural funds directed towards investment represent an average annual amount of 3% of GDP. The considerable foreign direct investments are balanced by no less significant Estonian direct investments and portfolio investments abroad by Estonian pension funds. External debt represented 79% of GDP at end June 2016, excluding intra-group debt related to foreign direct investments. Almost half corresponds to bank commitments, chiefly in the form of deposits made by Swedish banks in their local subsidiaries. As the public share is small, the balance is, therefore, made up by non-financial sector private debt. In addition, the debt is more than offset by the foreign assets of pension funds.
Following a vote of no confidence in November 2016 after disagreements over economic and social policy, Taavi Rõivas and the center-right, liberal Reform Party in power since 2001, have ceded power to a coalition formed around the leader of the Centre Party, Jüri Ratas. This coalition also includes the Social Democrats (SDE) and the conservatives of the Pro Patria and Res Publica Party (IRL), incidentally members of the previous government. This new coalition was made possible by the change of leadership within the center Party, the political representation of the Russian-speaking minority (1/4 of the population) whose previous leader was deemed pro-Russian and anti NATO, so not suitable. While pro-European policy and firmness towards Russia will remain, fiscal and social measures will probably be introduced with the aim of boosting growth. The country enjoys relative energy independence thanks to the exploitation of oil shale, of which the country is the world's leading producer and which covers a large part of Estonia's electricity needs. Furthermore, even if Russian gas only meets 10% of the country's energy needs, the country is connected with the Lithuanian gas terminal at Klaipeda, which covers almost 30% of its gas consumption. The business climate is excellent. The level of digitization is highly advanced.