Estonia

Capital: Tallinn

Local time:
It is %T:%M %A in Tallinn

GDP growth rate: 4.2% in 2013

FDI stock: 16 438 million USD in 2010

Economic trends

Estonia became a member of the European Union on May 1^st, 2004 and remains the only former Soviet country invited to join the OECD to this day (May 2010). Estonia has managed to move from a state-run and centralized economy to a dynamic market economy, liberalize by a succession of governments observing a strict budgetary orthodoxy while simultaneously modernizing the country.  The country has stands out mainly thanks to its IT sector (the invention of Skype, mobile payment systems, internet voting, multifunctional electronic identity cards and initiatives in the sphere of cyber security).

As the so-called "Baltic Tiger," Estonia experienced an average annual growth of more than 8% in 2000-2007. The strong demand was supported by the large amount of foreign investment, rising wages and strong growth in household debt. This rapid rise in living standards was accompanied by a significant reduction of unemployment (4% in July 2008).

However, due to its dependency on foreign investment, the country was hit hard by the recession (-5.1% of GDP in 2008 and -14% in 2009) , which resulted in a lack of liquidity, damaged real estate market, rising exchange rates and a spike in unemployment (more than 15% of the workforce in June 2009). During the same yera, the average salary dropped by almost 5%.

After two years of very deep recession, in 2010 the growth became again strong and healthy. This trend continued and intensified in 2011, with a growth rate of more than 6.5%. The crisis has nonetheless left behind a high rate of unemployment (11.3% in 2011), which is however declining. Estonia is considered one of the most liberal economies in the world by the Heritage Foundation's 2010 Economic Freedom Index.

Main branches of industry

Agriculture accounts for only 2.7% of the GDP and employs 3% of the active population.

The industrial sector, which represents 26.3% of the GDP, employs 33% of Estonian workers. The main industrial sectors of Estonia are the food industry (dairy products and meat processing), which accounts for 16% of the manufacturing industry, electronics (a traditional sector), chemical industry (which accounts for 6% of the manufacturing industry) and wood processing industry (this sector accounts for 24% of the manufacturing industry). The Estonian industrial sector was heavily affected by the economic crisis in 2008-2009 (-26.5%) and domestic and foreign demand were considerably reduced.

The services sector is the most developed, in particular transport and logistics, biotechnology and financial services. The sector accounts for 71% of the GDP employing 60% of the Estonian population. The telecommunications sector is the most performing one, Estonia has even acquired the nickname of E-stonia for its advanced progress in equipment and Internet research and development.

International trade

Despite the international economic crisis of 2008-2009, foreign trade's contribution to the GDP represents more than 150%. Rich in oil shale, a large part of Estonia's energy production is based on this resource (80%), which allows it to be energetically self-sufficient. Estonia is a net exporter of electricity, especially to Finland, Latvia and Lithuania.

The European Union countries account for 70% of Estonia's foreign trade and the CIS countries account for 11% of the total exports. The main export trading partners of Estonia are: Finland, Sweden, Russia, other Baltic states, Germany and the United States. The main export goods are electrical and electronic equipment, wood and mineral products, metals, agricultural and food industry products, transport equipment, raw materials, textiles and electricity.

Its main import partners are: Finland, Lithuania, Latvia, Germany, Sweden, Russia and Poland. Estonia mainly imports electric & electronic equipment, machinery, vehicles, mineral fuels (oil), iron and steel.