Economy - overview: 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 the lowest debt-to-GDP ratio in the EU.
The economy benefits from strong electronics and telecommunications sectors and strong trade ties with Finland, Sweden, Germany, and Russia. After two years of robust recovery in 2011 and 2012, the Estonian economy faltered in 2013 with only 1.6% GDP growth, mainly due to a continuing recession in much of the EU. GDP growth dropped below 2% in 2015 due to lower demand in key Scandinavian and Russian export markets. Rapid increases in investment, which includes EU development funding, and the recovery of export markets contributed to an estimated 4.2% GDP growth in 2017. Inflation also rose in 2017 alongside increased global prices for food and energy, which make up a large share of Estonia’s consumption basket.
Estonia is challenged by a shortage of labor, both skilled and unskilled, although the government has amended its immigration law to allow easier hiring of highly qualified foreign workers, and wage growth that outpaces productivity gains. The government is also pursuing efforts to boost productivity growth with a focus on innovations that emphasize technology start-ups and e-commerce.
Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Source: CIA World Factbook - This page was last updated on January 20, 2018