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The economy of Estonia is an
advanced economy A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastr ...
and the country is a member of the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
and of the
eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
.
Estonia Estonia, formally the Republic of Estonia, is a country by the Baltic Sea in Northern Europe. It is bordered to the north by the Gulf of Finland across from Finland, to the west by the sea across from Sweden, to the south by Latvia, an ...
's economy is heavily influenced by developments in the Finnish and Swedish economies.


Overview

Before the
Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...
, Estonia's economy was based on agriculture, but there was a significant knowledge sector, with the university city of
Tartu Tartu is the second largest city in Estonia after the Northern European country's political and financial capital, Tallinn. Tartu has a population of 91,407 (as of 2021). It is southeast of Tallinn and 245 kilometres (152 miles) northeast of ...
known for scientific contributions, and a growing industrial sector, similar to that of neighbouring
Finland Finland ( fi, Suomi ; sv, Finland ), officially the Republic of Finland (; ), is a Nordic country in Northern Europe. It shares land borders with Sweden to the northwest, Norway to the north, and Russia to the east, with the Gulf of Bot ...
. Products, such as butter, milk, and cheese were widely known in the
west Europe Western Europe is the western region of Europe. The region's countries and territories vary depending on context. The concept of "the West" appeared in Europe in juxtaposition to "the East" and originally applied to the ancient Mediterranean ...
an markets. The main markets were Germany and the United Kingdom, and only 3% of all commerce was with the neighbouring
USSR The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nati ...
. Estonia and
Finland Finland ( fi, Suomi ; sv, Finland ), officially the Republic of Finland (; ), is a Nordic country in Northern Europe. It shares land borders with Sweden to the northwest, Norway to the north, and Russia to the east, with the Gulf of Bot ...
had a relatively similar standard of living. The USSR's occupation and annexation of Estonia in 1940 and the ensuing
Nazi German Nazi Germany (lit. "National Socialist State"), ' (lit. "Nazi State") for short; also ' (lit. "National Socialist Germany") (officially known as the German Reich from 1933 until 1943, and the Greater German Reich from 1943 to 1945) was ...
and
Stalin Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as General Secretar ...
ist
Soviet The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...
destruction during World War II crippled the Estonian economy. The subsequent Soviet occupation and post-war
Sovietization Sovietization (russian: Советизация) is the adoption of a political system based on the model of soviets (workers' councils) or the adoption of a way of life, mentality, and culture modelled after the Soviet Union. This often included ...
of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure. After Estonia moved away from communism in the late 1980s, restored its independence in 1991 and became a market economy, it emerged as a pioneer in the global economy. In 1992, the country adopted the
Estonian kroon The kroon (sign: KR; code: EEK) was the official currency of Estonia for two periods in history: 1928–1940 and 1992–2011. Between 1 January and 14 January 2011, the kroon circulated together with the euro, after which the euro became the sole ...
as its own currency, and this greatly stabilised the economy. In 1994, it became one of the first countries in the world to adopt a
flat tax A flat tax (short for flat-rate tax) is a tax with a single rate on the taxable amount, after accounting for any deductions or exemptions from the tax base. It is not necessarily a fully proportional tax. Implementations are often progress ...
, with a uniform rate of 26% regardless of personal income. Estonia received more foreign investment per capita in the second half of the 1990s than any other country in Central and Eastern Europe. Between 2005 and 2008, the personal income tax rate was reduced from 26% to 21% in several steps. The country has been quickly catching up with the EU-15; its GDP per capita having grown from 34.8% of the EU-15 average in 1996 to 65% in 2007, similar to that of Central European countries. It is already rated a high-income country by the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
. The
GDP (PPP) per capita Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
of the country, a good indicator of wealth, was $35,974 in 2018 according to the World Bank, between that of
Lithuania Lithuania (; lt, Lietuva ), officially the Republic of Lithuania ( lt, Lietuvos Respublika, links=no ), is a country in the Baltic region of Europe. It is one of three Baltic states and lies on the eastern shore of the Baltic Sea. Lithuania ...
and
Cyprus Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is ...
, but below that of most long-time EU members such as
Spain , image_flag = Bandera de España.svg , image_coat = Escudo de España (mazonado).svg , national_motto = '' Plus ultra'' (Latin)(English: "Further Beyond") , national_anthem = (English: "Royal March") , ...
or
Italy Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical ...
. Because of its economic performance after regaining independence in 1991, Estonia has been termed one of the
Baltic Tiger Baltic Tiger is a term used to refer to any of the three Baltic states of Estonia, Latvia, and Lithuania during their periods of economic boom, which started after the year 2000 and continued until 2006–2007. The term is modeled on Four Asi ...
s. In 2008, Estonia was ranked 12th of 162 countries in the
Index of Economic Freedom The ''Index of Economic Freedom'' is an annual index and ranking created in 1995 by The Heritage Foundation and ''The Wall Street Journal'' to measure the degree of economic freedom in the world's nations. The creators of the index claim to t ...
2008, the best of any post-Soviet states. The same year, the country was at the bottom of the list of European states by labour market freedom, but the government is drafting improvements. For Estonia, the
financial crisis of 2007–2008 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of ...
was comparatively easier to weather, because Estonia's budget has consistently been kept balanced, and this meant that Estonia's public debt relative to the country's GDP has remained the lowest in Europe. The economy recovered in 2010. On 1 January 2011, Estonia adopted the euro, and became the first ex-Soviet republic to join the
eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
. In 2013, the
World Bank Group The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and best-known development bank in the world and an observer at the United Nations Development Gr ...
rated Estonia as 21st on the
Ease of Doing Business Index The ease of doing business index was an index created jointly by Simeon Djankov, Michael Klein, and Caralee McLiesh, three leading economists at the World Bank Group. The academic research for the report was done jointly with professors Edward ...
.


History


Early history

Until the early 13th century, the territory that is now known as Estonia was independent. The economy was largely an agricultural one, but Estonia being a country with a long coastline, there were also many maritime activities. Autonomous development was brought to an end by the
Northern Crusades The Northern Crusades or Baltic Crusades were Christian colonization and Christianization campaigns undertaken by Catholic Christian military orders and kingdoms, primarily against the pagan Baltic, Finnic and West Slavic peoples around th ...
undertaken by the King of Denmark, the German Livonian and the Teutonic military orders. The Estonian world was transformed by military conquest. The war against the invaders lasted from 1208 to 1227. The last Estonian county to fall was the island of Saaremaa in 1261. Thereafter, through many centuries until WWI, Estonian agriculture consisted of native peasants working large feudal-type estates held by ethnic
German German(s) may refer to: * Germany (of or related to) **Germania (historical use) * Germans, citizens of Germany, people of German ancestry, or native speakers of the German language ** For citizens of Germany, see also German nationality law **Ge ...
landlord A landlord is the owner of a house, apartment, condominium, land, or real estate which is rented or leased to an individual or business, who is called a tenant (also a ''lessee'' or ''renter''). When a juristic person is in this position, t ...
s. In the decades prior to independence, centralised
Czar Tsar ( or ), also spelled ''czar'', ''tzar'', or ''csar'', is a title used by East and South Slavic monarchs. The term is derived from the Latin word '' caesar'', which was intended to mean "emperor" in the European medieval sense of the t ...
ist rule had created a rather large industrial sector dominated by the
Kreenholm Manufacturing Company The Kreenholm Manufacturing Company (historical alternate spelling: Krenholm; et, Kreenholmi Manufaktuur; german: Krähnholm Manufaktur; russian: Кренгольмская мануфактура) was a textile manufacturing company located on th ...
, then the world's largest
cotton mill A cotton mill is a building that houses spinning or weaving machinery for the production of yarn or cloth from cotton, an important product during the Industrial Revolution in the development of the factory system. Although some were driven b ...
.


Independence

After declaring independence in 1918, the
Estonian War of Independence The Estonian War of Independence ( et, Vabadussõda, literally "Freedom War"), also known as the Estonian Liberation War, was a defensive campaign of the Estonian Army and its allies, most notably the United Kingdom, against the Bolshevik westw ...
and the subsequent signing of the Treaty of Tartu in 1920, the new Estonian state inherited a ruined post-war economy and an inflated ruble currency. Despite considerable hardship, dislocation, and unemployment, Estonia spent the first decade of independence entirely transforming its economy. In 1918, The Czarist ruble was replaced by the Estonian mark, which was in circulation until 1927. By 1929, a stable currency, the kroon, had been established. It was issued by the
Bank of Estonia Bank of Estonia ( et, Eesti Pank) is the central bank of Estonia as well as a member of the Eurosystem organisation of euro area central banks. The Bank of Estonia also belongs to the European System of Central Banks. Until 2010, the bank i ...
, the country's
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a centra ...
. Compensating the German landowners for their holdings, the government confiscated the estates and divided them into small farms, which subsequently formed the basis of Estonian prosperity. Trade focused on the local market and the West, particularly Germany and the United Kingdom. Only 3% of all commerce was with the USSR.


Soviet occupation

The USSR's forcible annexation of Estonia in 1940 and the ensuing
Nazi Nazism ( ; german: Nazismus), the common name in English for National Socialism (german: Nationalsozialismus, ), is the far-right totalitarian political ideology and practices associated with Adolf Hitler and the Nazi Party (NSDAP) in ...
and
Soviet The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...
destruction during
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
crippled the Estonian economy. Post-war Soviet occupation and Sovietisation of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure. More than 56% of Estonian farms were
collectivised Collective farming and communal farming are various types of, "agricultural production in which multiple farmers run their holdings as a joint enterprise". There are two broad types of communal farms: agricultural cooperatives, in which member- ...
in the month of April 1949 alone after mass deportations to Siberia the previous month. Moscow expanded on those Estonian industries which had locally available raw materials, such as
oil shale Oil shale is an organic-rich fine-grained sedimentary rock containing kerogen (a solid mixture of organic chemical compounds) from which liquid hydrocarbons can be produced. In addition to kerogen, general composition of oil shales constitut ...
mining and phosphorites.


Restoration of independence, modernisation and liberalisation

"Since reestablishing independence, Estonia has styled itself as the gateway between East and West and pursued economic reform and integration with the West." Estonia's market reforms put it among the economic leaders in the former
COMECON The Council for Mutual Economic Assistance (, ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc#List of s ...
area. A balanced budget, almost non-existent
public debt A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit oc ...
, flat-rate
income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Ta ...
,
free trade Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econ ...
regime, fully convertible currency backed by
currency board In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exch ...
and a strong peg to the
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
, competitive commercial banking sector, hospitable environment for foreign investment, innovative
e-Services E-services (electronic services) are services which make use of information and communication technologies (ICTs). The three main components of e-services are: # service provider; # service receiver; and # the channels of service delivery (i.e., t ...
and mobile-based services are all hallmarks of Estonia's free-market-based economy. In June 1992, Estonia replaced the
ruble The ruble (American English) or rouble (Commonwealth English) (; rus, рубль, p=rublʲ) is the currency unit of Belarus and Russia. Historically, it was the currency of the Russian Empire and of the Soviet Union. , currencies named ''rub ...
with its own freely convertible currency, the kroon (EEK). A
currency board In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exch ...
was created and the new currency was pegged to the German Mark at the rate of 8 Estonian kroons for 1
Deutsche Mark The Deutsche Mark (; English: ''German mark''), abbreviated "DM" or "D-Mark" (), was the official currency of West Germany from 1948 until 1990 and later the unified Germany from 1990 until the adoption of the euro in 2002. In English, it was ...
. When Germany introduced the
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
the peg was changed to 15.6466 kroons for 1 euro. Estonia was set to adopt the euro in 2008, but due to the inflation rate being above the required 3%, the adoption date was delayed to 2011. On 1 January 2011, Estonia adopted the euro and became the 17th
eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
member state. The
privatisation Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
of state-owned firms is virtually complete, with only the port and the main power plants remaining in government hands. The constitution requires a balanced budget, and the protection afforded by Estonia's intellectual property laws is on a par of that of Europe's. In early 1992, both liquidity problems and structural weakness stemming from the communist era precipitated a banking crisis. As a result, effective bankruptcy legislation was enacted and privately owned; well-managed banks emerged as market leaders. Today, near-ideal conditions for the banking sector exist. Foreigners are not restricted from buying bank shares or acquiring majority holdings. The fully electronic
Tallinn Stock Exchange The Nasdaq Tallinn AS, formerly known as the Tallinn Stock Exchange, is a stock exchange operating in Tallinn, Estonia. Nasdaq Tallinn is the only regulated secondary securities market in Estonia. The major stock market index is Nasdaq Tallinn, fo ...
opened in early 1996, and was purchased by Finland's
Helsinki Stock Exchange The Nasdaq Helsinki, formerly known as the Helsinki Stock Exchange ( fi, Helsingin Pörssi, sv, Helsingforsbörsen), is a stock exchange located in Helsinki, Finland. Since 3 September 2003, it has been part of Nasdaq Nordic (previously called ...
in 2001. Estonia joined the World Trade Organization in 1999. From the early 2000s to the latter part of that decade, the Estonian economy experienced considerable growth. In the year 2000, Estonian GDP grew by 6.4%. Upon accession to the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
in 2004, double-digit growth was soon after observed. GDP grew by 7.9% in 2007 alone. Increases in labor costs, the imposition of tax on tobacco, alcohol, electricity, fuel, gas, and other external pressures (growing prices of oil and food on the global market) were expected to inflate price levels by 10% in the first months of 2009.


The 2008 financial crisis, response and recovery

The
financial crisis of 2007–2008 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of ...
has had a deep effect on the Estonian economy, primarily as a result of an investment and consumption slump that followed the burst of the real estate market bubble that had been building up during the preceding years. After a long period of very high growth of GDP, the GDP of Estonia decreased. In the first quarter 2008, GDP grew only 0.1%, and then decreased: negative growth was −1.4% in the 2nd quarter, a little over −3% (on a year-to-year basis) in the 3rd quarter, and −9.4% in the 4th quarter of that year. The government made a supplementary negative budget, which was passed by the
Riigikogu The Riigikogu (; from Estonian ''riigi-'', of the state, and ''kogu'', assembly) is the unicameral parliament of Estonia. In addition to approving legislation, the Parliament appoints high officials, including the Prime Minister and Chief Just ...
. The revenue of the budget was decreased for 2008 by EEK 6.1 billion and the expenditure by EEK 3.2 billion. A current account-deficit was extant, but began to shrink in the last months of 2008, and had been expected to continue to do so in the near future. In 2009, the Estonian economy further contracted by 15.1% in the first quarter. Low domestic and foreign demand had depressed the economy's overall output. The Estonian economy's 33.7% industrial production drop was the sharpest decrease in industrial production in the entire
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
. That year, Estonia was one of the five worst-performing economies in the world in terms of annual GDP growth rate, and had one of the greatest rates of unemployment in the EU, which rose from 3.9% in May 2008 to 15.6% in May 2009. In December 2008, Estonia became one of the donor countries to the
IMF The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glob ...
lead rescue package for
Latvia Latvia ( or ; lv, Latvija ; ltg, Latveja; liv, Leţmō), officially the Republic of Latvia ( lv, Latvijas Republika, links=no, ltg, Latvejas Republika, links=no, liv, Leţmō Vabāmō, links=no), is a country in the Baltic region of ...
. In response to the crisis, the Ansip government opted for fiscal consolidation and retrenchment by maintaining fiscal discipline and a balanced budget in combination with austerity packages: The government increased taxes, and reduced public spending by slashing expenditures and public salaries across the board. In July 2009, the
value-added tax A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...
was increased from 18% to 20%. The recorded budget deficit for 2009 was just 1.7% of GDP. The result was, that Estonia was one of only five EU countries in 2009 that had met the Maastricht criteria for debt and deficit, and had the third-lowest deficit after Luxembourg and Sweden. Neither did Estonia need to ask help from the
IMF The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glob ...
. Despite the third-largest drop in GDP, the country had the lowest budget deficit and the lowest public debt among Central and Eastern European countries. In 2009, the Estonian economy began to rebound, and economic growth resumed in the second half of 2010. The country's unemployment rate has since dropped significantly to pre-recession levels. To top it off, Estonia was granted permission in 2010 to join the eurozone in 2011.


Joining the euro

Before joining the eurozone, the
Estonian kroon The kroon (sign: KR; code: EEK) was the official currency of Estonia for two periods in history: 1928–1940 and 1992–2011. Between 1 January and 14 January 2011, the kroon circulated together with the euro, after which the euro became the sole ...
had been pegged to the euro at a rate of 15.64664 EEK to one euro; before then, the kroon was pegged to the German mark at approximately 8 EEK to 1 DEM. Plans to join the euro were in place well before 2011. The design of
Estonian euro coins Estonian euro coins feature a single design for all eight coins. This is a design by Lembit Lõhmus and features a silhouette map of Estonia together with the word Eesti (Estonia) and twelve stars, symbolic of the European Union, surrounding the ...
was finalized in late 2004. Estonia's journey towards the euro took longer than originally projected, owing to the inflation rate continually being above the required 3% before 2010, which prevented the country from fulfilling the entry criteria. The country originally planned to adopt the euro on 1 January 2007; however, it did not formally apply that year, and officially changed its target date twice: first to 1 January 2008, and later to 1 January 2011. On 12 May 2010, the European Commission announced that Estonia had met all criteria to join the eurozone. On 8 June 2010, EU finance ministers agreed that Estonia would be able to join the euro on 1 January 2011. On 13 July 2010, Estonia received the final approval from ECOFIN to adopt the euro onwards from 1 January 2011. The switchover to the euro took place on 1 January 2011. With that, Estonia became one of the first post-Soviet states to join the
eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
. On 9 August 2011, just days after
Standard & Poor's S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is con ...
raised Estonia's credit rating from A to AA-. Among the factors, S&P cited as contributing to its decision was confidence in Estonia's ability to "sustain strong economic growth." Estonia's GDP growth rate in 2011 was above 8%, despite having negative population growth.


The economy today

In the second quarter of 2013, the average monthly gross wage in Estonia was €976 (15,271 kroons, US$1,328). This figure has grown consistently to €1,310 (20,497 kroons, US$1,473) as of 2018 and to €1,586 (20,816 kroons, US$1,876) as of June 2021. Estonia is nearly energy-independent, supplying over 90% of its electricity needs with locally mined oil shale. Alternative energy sources such as wood, peat, and biomass make up approximately 9% of primary energy production. Estonia imports needed petroleum products from western Europe and Russia. Oil shale energy, telecommunications, textiles, chemical products, banking, services, food and fishing, timber, shipbuilding, electronics, and transportation are key sectors of the economy. The
ice-free port A port is a maritime facility comprising one or more wharves or loading areas, where ships load and discharge cargo and passengers. Although usually situated on a sea coast or estuary, ports can also be found far inland, such as Ha ...
of Muuga, near
Tallinn Tallinn () is the most populous and capital city of Estonia. Situated on a bay in north Estonia, on the shore of the Gulf of Finland of the Baltic Sea, Tallinn has a population of 437,811 (as of 2022) and administratively lies in the Harju '' ...
, is a modern facility featuring good transshipment capability, a high-capacity grain elevator, chill/frozen storage, and brand-new oil tanker off-loading capabilities. The railroad serves as a conduit between the West, Russia, and other points to the East. Estonia today is mainly influenced by developments in Finland, Russia, Sweden and Germany – the four main trade partners. The government has significantly increased its spending on innovation since 2016, with €304 million aimed to stimulate research and development in 2017.


Future projections

Long-term prospects for the Estonian economy remain among the most promising in Europe. In 2011, the real GDP growth in Estonia was 8.0%, and according to projections made by CEPII, the GDP per capita could rise to the level of Nordic economies of Sweden, Finland, Denmark, and Norway by 2025. According to the same projections, by 2050, Estonia could become the most productive country in the EU, after Luxembourg, and thus join the top five most productive nations in the world. According to the Ministry of Estonia, has committed to developing a
circular economy A circular economy (also referred to as circularity and CE) is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. CE aim ...
strategic document and action plan by the end of 2021 which focuses on developing circular economy indicators by 2019 and mapping the current situation of Estonian circular economy, compiling a strategic document and action plan for circular economy in Estonia, and stakeholder involvement throughout the process as of 2020–2021. In March 2020, Margit Rüütelmann, executive of Estonian Circular Economy Industries Association, specified that the new
Circular Economy Action Plan The European Green Deal, approved 2020, is a set of policy initiatives by the European Commission with the overarching aim of making the European Union (EU) climate neutral in 2050. An impact assessed plan will also be presented to increase the ...
followed through the
European Commission The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body ...
persisted to depend totally on fossil fuels and non-renewable herbal assets with inside the framework of the substantial improvement model, then through 2050, the sector could be the usage of assets as though it had 3 planets to make use of. She further added, the EU may even make investments withinside the financial system. This method that now's the best time to stimulate a round financial system and spend money on modern trends and technologies, which, in turn, reduces the carbon footprint of merchandise in the course of their beneficial lifestyles and extensively extends the duration of use of substances already in circulation.


Employment participation

Estonia has around 600,000 employees, yet the country has a shortage of skilled labor, and since skill shortages are experienced everywhere in Europe, the government has increased working visa quota for non- EEA citizens, although it has nevertheless been criticized for being inadequate for addressing the shortages. The late-2000s recession in the world, the near-concurrent local property bust with changes in Estonian legislation to increase
labour market flexibility The degree of labour market flexibility is the speed with which labour markets adapt to fluctuations and changes in society, the economy or production. This entails enabling labour markets to reach a continuous equilibrium determined by the inter ...
(making it easier for companies to lay off workers) saw Estonia's unemployment rate shoot up to 18.8% throughout the duration of the crisis, then stabilise to 13.8% by summer 2011, as the economy recovered on the basis of strong exports. Internal consumption, and therefore imports, plummeted; and cuts were made in public finances. Some of the reduction in unemployment has been attributed to some Estonians' emigrating for employment to Finland, the UK, Australia, and elsewhere. After the recession, the unemployment rate went lower, and throughout 2015 and 2016, the rate stayed near the levels that preceded the economic downturn, staying at just above 6%.


Sectors

Tallinn Tallinn () is the most populous and capital city of Estonia. Situated on a bay in north Estonia, on the shore of the Gulf of Finland of the Baltic Sea, Tallinn has a population of 437,811 (as of 2022) and administratively lies in the Harju '' ...
has emerged as the country's financial center. According to Invest in Estonia, advantages of Estonian financial sector are unbureaucratic cooperation between companies and authorities, and relative abundance of educated people although young educated Estonians tend to emigrate to western Europe for greater income. The largest banks are
Swedbank Swedbank AB () is a Nordic- Baltic banking group based in Stockholm, Sweden, offering retail banking, asset management, financial, and other services. In 2019 Swedbank had 900,000 private and 130,000 corporate clients and a 60% market share o ...
, SEB Pank, and
Nordea Nordea Bank Abp, commonly referred to as Nordea, is a European financial services group operating in northern Europe and based in Helsinki, Finland. The name is a blend of the words "Nordic" and "idea". The bank is the result of the successive m ...
. Several IPOs have been made recently on the
Tallinn Stock Exchange The Nasdaq Tallinn AS, formerly known as the Tallinn Stock Exchange, is a stock exchange operating in Tallinn, Estonia. Nasdaq Tallinn is the only regulated secondary securities market in Estonia. The major stock market index is Nasdaq Tallinn, fo ...
, a member
OMX Nasdaq Nordic is the common name for the subsidiaries of Nasdaq, Inc. that provide financial services and operate marketplaces for securities in the Nordic and Baltic regions of Europe. Historically, the operations were known by the company ...
system. The Estonian service sector employs over 60% of workforce. Estonia has a strong information technology (IT) sector, partly due to the
Tiigrihüpe Tiigrihüpe (Estonian for ''Tiger Leap'') was a project undertaken by Republic of Estonia to heavily invest in development and expansion of computer and network infrastructure in Estonia, with a particular emphasis on education. The project was ...
project undertaken in mid-1990s, and has been mentioned as the most "wired" and advanced country in Europe in the terms of
e-government E-government (short for electronic government) is the use of technological communications devices, such as computers and the Internet, to provide public services to citizens and other persons in a country or region. E-government offers new ...
. Farming, which had been forcibly
collectivized Collective farming and communal farming are various types of, "agricultural production in which multiple farmers run their holdings as a joint enterprise". There are two broad types of communal farms: agricultural cooperatives, in which member- ...
for decades until the transition era of 1990–1992, has become privatized and more efficient, and the total farming area has increased in the period following Estonia's restoration of independence. The share of agriculture in the gross domestic product decreased from 15% to 3.3% during 1991–2000, while employment in agriculture decreased from 15% to 5.2%. The
mining industry Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. The exploitation of these deposits for raw material is based on the economic via ...
makes up 1% of the GDP. Mined commodities include oil shale,
peat Peat (), also known as turf (), is an accumulation of partially Decomposition, decayed vegetation or organic matter. It is unique to natural areas called peatlands, bogs, mires, Moorland, moors, or muskegs. The peatland ecosystem covers and ...
, and industrial minerals, such as
clay Clay is a type of fine-grained natural soil material containing clay minerals (hydrous aluminium phyllosilicates, e.g. kaolin, Al2 Si2 O5( OH)4). Clays develop plasticity when wet, due to a molecular film of water surrounding the clay pa ...
s,
limestone Limestone ( calcium carbonate ) is a type of carbonate sedimentary rock which is the main source of the material lime. It is composed mostly of the minerals calcite and aragonite, which are different crystal forms of . Limestone forms w ...
,
sand Sand is a granular material composed of finely divided mineral particles. Sand has various compositions but is defined by its grain size. Sand grains are smaller than gravel and coarser than silt. Sand can also refer to a textural class ...
and
gravel Gravel is a loose aggregation of rock fragments. Gravel occurs naturally throughout the world as a result of sedimentary and erosive geologic processes; it is also produced in large quantities commercially as crushed stone. Gravel is classifi ...
. Soviets created badly polluting industry in the early 1950s, concentrated in the north-east of the country. Socialist economy and military areas left the country highly polluted, and mainly because of
oil shale industry The oil shale industry is an industry of mining and processing of oil shale—a fine-grained sedimentary rock, containing significant amounts of kerogen (a solid mixture of organic chemical compounds), from which liquid hydrocarbons can be manu ...
in Ida-Virumaa,
sulfur dioxide Sulfur dioxide (IUPAC-recommended spelling) or sulphur dioxide (traditional Commonwealth English) is the chemical compound with the formula . It is a toxic gas responsible for the odor of burnt matches. It is released naturally by volcanic a ...
emissions per person are almost as high as in the Czech Republic. The coastal seawater is polluted in certain locations, mainly the east. The government is looking for ways to reduce pollution further. In 2000, the emissions were 80% smaller than in 1980, and the amount of unpurified wastewater discharged to water bodies was 95% smaller than in 1980. Estonian productivity is experiencing rapid growth, and consequently wages are also rising quickly, with a rise in private consumption of about 8% in 2005. According to Estonian Institute of Economic Research, the largest contributors to GDP growth in 2005 were processing industry, financial intermediation, retailing and wholesale trade, transport and communications.


Agriculture

Estonia produced in 2018: * 450 thousand tons of
wheat Wheat is a grass widely cultivated for its seed, a cereal grain that is a worldwide staple food. The many species of wheat together make up the genus ''Triticum'' ; the most widely grown is common wheat (''T. aestivum''). The archaeologi ...
; * 347 thousand tons of
barley Barley (''Hordeum vulgare''), a member of the grass family, is a major cereal grain grown in temperate climates globally. It was one of the first cultivated grains, particularly in Eurasia as early as 10,000 years ago. Globally 70% of barley p ...
; * 113 thousand tons of
rapeseed Rapeseed (''Brassica napus ''subsp.'' napus''), also known as rape, or oilseed rape, is a bright-yellow flowering member of the family Brassicaceae (mustard or cabbage family), cultivated mainly for its oil-rich seed, which naturally contains a ...
; * 88 thousand tons of
potato The potato is a starchy food, a tuber of the plant ''Solanum tuberosum'' and is a root vegetable native to the Americas. The plant is a perennial in the nightshade family Solanaceae. Wild potato species can be found from the southern Uni ...
; * 78 thousand tons of
oat The oat (''Avena sativa''), sometimes called the common oat, is a species of cereal grain grown for its seed, which is known by the same name (usually in the plural, unlike other cereals and pseudocereals). While oats are suitable for human con ...
; * 53 thousand tons of
pea The pea is most commonly the small spherical seed or the seed-pod of the flowering plant species ''Pisum sativum''. Each pod contains several peas, which can be green or yellow. Botanically, pea pods are fruit, since they contain seeds and d ...
; * 29 thousand tons of rye; In addition to smaller productions of other agricultural products.


Largest companies by revenue


Largest companies by profit


Infrastructure

Railway transport dominates the cargo sector, comprising 70% of all carried goods, domestic and international. Road transport is the one that prevails in the passenger sector, accounting for over 90% of all transported passengers. 5 major cargo ports offer easy navigational access, deep waters, and good ice conditions. There are 12 airports and 1
heliport A heliport is a small airport suitable for use by helicopters and some other vertical lift aircraft. Designated heliports typically contain one or more touchdown and liftoff areas and may also have limited facilities such as fuel or hangars. I ...
in Estonia.
Lennart Meri Tallinn Airport Tallinn Airport ( et, Tallinna lennujaam, ) or Lennart Meri Tallinn Airport ( et, Lennart Meri Tallinna lennujaam) is the largest airport in Estonia, which serves as a hub for the national airline Nordica, as well as the secondary hub for Air ...
is the largest airport in Estonia, with 1,73 million passengers and 22,764 tons of cargo (annual cargo growth 119.7%) in 2007. International flight companies such as SAS,
Finnair Finnair ( fi, Finnair Oyj, sv, Finnair Abp) is the flag carrier and largest airline of Finland, with its headquarters in Vantaa on the grounds of Helsinki Airport, its hub. Finnair and its subsidiaries dominate both domestic and international ...
,
Lufthansa Deutsche Lufthansa AG (), commonly shortened to Lufthansa, is the flag carrier of Germany. When combined with its subsidiaries, it is the second- largest airline in Europe in terms of passengers carried. Lufthansa is one of the five founding ...
,
EasyJet EasyJet plc (styled as easyJet) is a British multinational low-cost airline group headquartered at London Luton Airport. It operates domestic and international scheduled services on 927 routes in more than 34 countries via its affiliate air ...
, and Nordic Aviation Group provide direct flights to 27 destinations. Approximately 7.5% of the country's
workforce The workforce or labour force is a concept referring to the pool of human beings either in employment or in unemployment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic reg ...
is employed in transportation and the sector contributes over 10% of GDP. Estonia is getting much business from traffic between European Union and Russia, especially oil cargo through Estonian ports. Transit trade's share of GDP is disputed, but many agree that Russia's increased hostility is decreasing the share. Instead of coal, electricity is generated by burning oil shale, with largest stations in Narva. Oil shale supplies around 70% of the country's primary energy. Other energy sources are natural gas imported from Russia, wood,
motor fuel An engine or motor is a machine designed to convert one or more forms of energy into mechanical energy. Available energy sources include potential energy (e.g. energy of the Earth's gravitational field as exploited in hydroelectric power g ...
s, and
fuel oil Fuel oil is any of various fractions obtained from the distillation of petroleum (crude oil). Such oils include distillates (the lighter fractions) and residues (the heavier fractions). Fuel oils include heavy fuel oil, marine fuel oil (MFO), b ...
s. Wind power in Estonia amounts to 58.1 
megawatt The watt (symbol: W) is the unit of power or radiant flux in the International System of Units (SI), equal to 1 joule per second or 1 kg⋅m2⋅s−3. It is used to quantify the rate of energy transfer. The watt is named after James ...
s, whilst roughly 399 megawatts worth of projects are currently being developed. Estonian energy liberalization is lagging far behind the
Nordic energy market Nordic electricity market is a common market for electricity in the Nordic countries. It is one of the first free electric-energy markets in Europe and is traded in NASDAQ OMX Commodities Europe and Nord Pool Spot. In 2003, the largest market sha ...
. During the accession negotiations with the EU, Estonia agreed that at least 35% of the market are opened before 2009 and all of non-household market, which totals around 77% of consumption, before 2013. Estonia is concerned that Russia could use energy markets to bully it. In 2009, the government considered granting permits to nuclear power companies, and there were plans for a shared nuclear facility with Latvia and Lithuania. Those plans were shelved after the
Fukushima Daiichi nuclear disaster The was a nuclear accident in 2011 at the Fukushima Daiichi Nuclear Power Plant in Ōkuma, Fukushima, Japan. The proximate cause of the disaster was the 2011 Tōhoku earthquake and tsunami, which occurred on the afternoon of 11 March 2011 ...
in March 2011. Estonia has high Internet penetration, and connections are available throughout most of the country.


Trade

Estonia exports machinery and equipment (33% of all exports annually), wood and paper (15% of all exports annually), textiles (14% of all exports annually), food products (8% of all exports annually), furniture (7% of all exports annually), and metals and
chemical A chemical substance is a form of matter having constant chemical composition and characteristic properties. Some references add that chemical substance cannot be separated into its constituent elements by physical separation methods, i.e., w ...
products. Estonia also exports 1.562 million megawatt hours of electricity annually. Estonia imports machinery and equipment (33.5% of all imports annually), chemical products (11.6% of all imports annually), textiles (10.3'% of all imports annually), food products (9.4% of all imports annually), and transportation equipment (8.9% of all imports annually). Estonia imports 200 thousand megawatt hours of electricity annually.


Natural resources


Data

The following table shows the main economic indicators in 1993–2018. Gross domestic product by county


See also

*
Baltic Tiger Baltic Tiger is a term used to refer to any of the three Baltic states of Estonia, Latvia, and Lithuania during their periods of economic boom, which started after the year 2000 and continued until 2006–2007. The term is modeled on Four Asi ...
* Banking in Estonia *
Economy of Europe The economy of Europe comprises about 748 million people in 50 countries. The formation of the European Union (EU) and in 1999 the introduction of a unified currency, the Euro, brought participating European countries closer through the ...


References

{{DEFAULTSORT:Economy of Estonia
Estonia Estonia, formally the Republic of Estonia, is a country by the Baltic Sea in Northern Europe. It is bordered to the north by the Gulf of Finland across from Finland, to the west by the sea across from Sweden, to the south by Latvia, an ...
Estonia Estonia, formally the Republic of Estonia, is a country by the Baltic Sea in Northern Europe. It is bordered to the north by the Gulf of Finland across from Finland, to the west by the sea across from Sweden, to the south by Latvia, an ...
Estonia Estonia, formally the Republic of Estonia, is a country by the Baltic Sea in Northern Europe. It is bordered to the north by the Gulf of Finland across from Finland, to the west by the sea across from Sweden, to the south by Latvia, an ...