Economy of Estonia

Economy of Estonia

Central business district of Tallinn
Currency	Euro (EUR, €)
Fiscal year	Calendar year
Trade organisations	EU, WTO and OECD
Country group	Developed/Advanced[1] High-income economy[2]
Statistics
Population	1,340,068 (1 January 2021)[3]
GDP	$42 billion (nominal, 2023)[4] $62 billion (PPP, 2023)[4]
GDP rank	101st (nominal, 2023) 110th (PPP, 2023)
GDP growth	−1.3% (2022)[4] −1.2% (2023)[4] 3.2% (2024)[4]
GDP per capita	$32,460 (nominal, 2023)[4] $48,700 (PPP, 2023)[4]
GDP per capita rank	37th (nominal, 2023) 40th (PPP, 2023)
GDP by sector	agriculture: 2.8% industry: 29% services: 68% (2017 est.)[5]
Inflation (CPI)	9.7% (2023)[4]
Population below poverty line	22.5% – income below €756/month (2022)[6] 24.3% at risk of poverty or social exclusion (AROPE, 2019)[7]
Gini coefficient	30.5 medium (2019, Eurostat)[8]
Human Development Index	0.890 very high (2021)[9] (31st) 0.829 very high (22nd) (2021)[10]
Labour force	693,759 (2019)[11] 79.5% employment rate (2018)[12]
Labour force by occupation	agriculture: 2.7% industry: 20.5% services: 76.8% (2017 est.)[5]
Unemployment	7.8% (July 2020)[13] 23.2% youth unemployment (15 to 24 year-olds; June 2020)[14]
Average gross salary	€2,065, monthly (December, 2023)
Average net salary	€1,598, monthly (December, 2023)
Main industries	engineering, electronics, wood and articles of wood, textiles, information technology, telecommunications
External
Exports	€14.4 billion (2018)[15]
Export goods	Electrical equipment, wood and articles of wood, mineral products, agriculture products, mechanical appliances
Main export partners	Finland 16%  Sweden 11%  Latvia 10%  Russia 8%  Germany 6% Others 51% (2018)[15]
Imports	€16.2 billion (2018)[15]
Import goods	Electrical equipment, transport equipment, agricultural products, mineral products, mechanical appliances
Main import partners	Finland 13%  Germany 10%  Lithuania 10%  Sweden 9%  Russia 9% Others 50% (2018)[15]
FDI stock	$27.05 billion (31 December 2017 est.)[5] Abroad: $10.96 billion (31 December 2017 est.)[5]
Current account	$809 million (2017 est.)[5]
Gross external debt	$19.05 billion (31 December 2016 est.)[5]
Public finances
Government debt	8.4% of GDP (2019)[16] €2.4 billion (2019)[16]
Budget balance	€90 million deficit (2019)[16] −0.3% of GDP (2019)[16]
Revenues	38.7% of GDP (2019)[16]
Expenses	39.0% of GDP (2019)[16]
Economic aid	€3.4 billion from European Structural and Investment Funds (2007–2013)[17] €4.46 billion from European Structural and Investment Funds (2014–2020)[18]
Credit rating	Standard & Poor's: AA− Fitch Ratings: A+ Moody's: A1 Scope: A+[19]
Foreign reserves	$345 million (31 December 2017 est.)[5]
All values, unless otherwise stated, are in US dollars.

The economy of Estonia is rated advanced by the World Bank, i.e. with high quality of life and advanced infrastructure relative to less industrialized nations. Estonia is a member of the European Union and eurozone.^[20] The economy is heavily influenced by developments in the Finnish and Swedish economies.^[21]

Historically, Estonia's economy was agricultural, moderinising significantly post-independence from Russia in 1918. There was a notable knowledge sector in Tartu and expanding industrial sector, exemplified by the Kreenholm Manufacturing Company. Western European markets were familiar with Estonian dairy, with the main trade partners being Germany and the UK; only 3% of commerce was with the neighbouring USSR. Estonia and Finland had a similar standard of living.^[22] USSR's annexation of Estonia in 1940 and destruction during World War II crippled the economy. Post-war Sovietization continued, with the integration of Estonia's economy into the USSR's centrally-planned structure.

After Estonia restored its independence in 1991 and became a market economy, it emerged as a pioneer in the global economy. Estonia styled itself as a bridge between East and West, adopting significant economic reforms and technological innovations. In 1992, the country adopted the Estonian kroon as its currency, this stabilised the economy. In 1994, it became the first country in the world to adopt a flat tax, with a rate of 26% regardless of personal income. Estonia received more foreign investment, per person, in the late 1990s than any other country in Central and Eastern Europe. The country has been catching-up with the EU-15 - the richer European countries. Its GDP per capita grew from 35% of the EU-15 average in 1996 to 65% in 2007, similar to Central European countries.^[23] Income per person was $49,000 in 2023 according to the IMF; this was between Poland and Portugal, but below Spain.^[24] Because of its economic performance Estonia was termed one of the Baltic Tigers.

For Estonia, the 2007–2008 financial crisis was easier to weather, because its budget has consistently been kept balanced, and this meant public debt relative to GDP remained the lowest in Europe. The economy recovered in 2010.^[25] In January 2011, Estonia adopted the euro, and became the first ex-Soviet republic to join the eurozone.^[26] Estonia has demonstrated resilience, with a strong service sector, particularly in IT due to the Tiigrihüpe project, and advanced e-government services. Estonia's commitment to a circular economy, innovation and its success in maintaining a balanced budget, low public debt, and a competitive tax system have positioned it as a model of economic reform and growth in post-Soviet Europe.