Estonia flag Estonia: Economic outline

Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

After its recovery from the crisis, Estonian growth was affected by an unfavourable regional situation (European sanctions against Russia and the following counter-sanctions), but it grew at a fast pace in recent years (+5% in 2019). Nevertheless, the COVID-19 pandemic and the crisis that followed had a severe impact on the country’s economy, with GDP dropping by 3% in 2020 (a relatively moderate contraction compared to other EU countries). In 2021, Estonia’s economy rebounded, with an estimated GDP growth of 8.5%, driven by private demand and government stimulus. Economic activity is forecast to moderate to growth rates of 4.2% in 2022 and 3.7% in 2023, with positive contributions in particular from net exports and household consumption (IMF).

Estonia became a member of the European Union on May 1 2004 and was the first former Soviet country to join the OECD in May 2010. This Baltic republic has managed to move from a state-run and centralised economy to a dynamic market economy, liberalised by a succession of governments observing strict budgetary orthodoxy and modernising the country. The country has stood 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 cybersecurity), as well as its performances in the green energy sector. Furthermore, Estonia enjoys relative energy independence through the exploitation of shale oil, of which the country is one of the world's largest producers and which covers a large part of its electricity needs. In general, the country has stable public finances; nevertheless, the general government deficit was estimated at -4% of GDP in 2021 (after peaking one year earlier). The deficit is projected to decrease to 2.9% of GDP in 2022 and 2% in 2023, as higher revenues counterbalance higher public wages, healthcare and additional investments. Although it bounced to 20% in 2021 from a pre-pandemic level of 8.6%, the Estonian debt-to-GDP ratio is still the lowest in the EU. However, it is projected to follow an upward trend over the forecast horizon (at 21.4% and 22.4% this year and the next, respectively - IMF). The global energy price hikes and supply bottlenecks contributed to a rise in manufacturing, transport and delivery costs, resulting in an inflation rate of 3.8% in 2021. The rate is expected to further increase to 4.9% in 2022 before easing to 2.2% in 2023.

In recent years, the Estonian labour market has been characterized by labour shortages and consequently rising nominal wages. Unemployment stood at 6.55 in 2021 (from a level of 4.4% before the sanitary crisis), but is forecast to gradually decline, reaching 6% this year and 5.4% in 2023. According to the latest data published by Eurostat, 22.8% of the population is at risk of poverty. In 2021, the real GDP per capita (PPP) was estimated at USD 39,729 by the IMF.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 31.0530.63e36.0439.5442.60
GDP (Constant Prices, Annual % Change) 4.1-3.0e8.54.23.7
GDP per Capita (USD) 23,400e23,036e27,10129,73532,046
General Government Balance (in % of GDP) -0.1-4.3e-4.0-2.9-2.0
General Government Gross Debt (in % of GDP) 8.618.5e20.021.422.4
Inflation Rate (%) 2.3-0.6e4.511.94.6
Unemployment Rate (% of the Labour Force) 4.46.8e6.56.05.4
Current Account (billions USD) 0.62-0.18-0.65-0.78-0.89
Current Account (in % of GDP) 2.0-0.6-1.8-2.0-2.1

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 ZAR 0.060.070.060.060.05

Source: World Bank, 2015

 

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Latest Update: July 2022