Estonia flag Estonia: Economic outline

Economic Outline

Economic Indicators

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 until the breakout of the COVID-19 pandemic. ). In 2021, Estonia’s economy rebounded, whereas in 2022 GDP growth was sluggish: while it was estimated at 1% by the IMF, the EU Commission recorded a contraction of 0.3%. In fact, the national economy was severely hit by the steep rise in energy prices and suffered from a strong pass-through to other inflation components, therefore both private consumption and industrial output slowed markedly towards the end of the year. GDP, however, is forecast to return to growth in 2023 (1.8% according to the IMF forecast) as the current headwinds, notably inflation, weak external demand and low confidence gradually subside. 2024 should see a more robust expansion driven by a revitalisation of export demand and private consumption.

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; in 2022, the general government fiscal deficit was contained (1.7% of GDP as per Fitch Ratings estimates) thanks to higher revenues prompted by the rise in inflation. For 2023, Fitch foresees a deficit of 4.4% of GDP (as opposed to 2% according to the IMF). As a result of widening fiscal deficits and weaker growth, the general government debt-to-GDP ratio is set to rise, reaching 20.3% by 2024 from 18.3% estimated for 2022. Although it is a marked increase compared to the pre-pandemic ratio of 8.5%, the ratio is still the lowest in the EU. The global energy price hikes and supply bottlenecks contributed to a rise in manufacturing, transport and delivery costs, with a strong pass-through to other inflation components, resulting in an overall rate of 21% over the course of 2022. The deceleration recorded from August is expected to continue in 2023 driven by declining commodity and energy prices, with the inflation rate projected at 9.5%, before it returns closer to the ECB’s target in 2024 (2.5%).

In recent years, the Estonian labour market has been characterized by labour shortages and consequently rising nominal wages. Unemployment increased to 6.6% in 2022, from 6.2% one year earlier. Corporate expectations for employment became more pessimistic towards the end of the year and the IMF forecasts the unemployment rate to slightly edge up to 6.8% in 2023. In 2021, the Estonian real GDP per capita (PPP) was estimated at USD 46,126 by the IMF, still below the EU average. According to the latest data published by Eurostat, 22.3% of the population is at risk of poverty.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 37.9541.8044.5047.1049.78
GDP (Constant Prices, Annual % Change) -0.5-
GDP per Capita (USD) 28,13630,99833,01834,97637,002
General Government Balance (in % of GDP) -0.7-2.5-2.3-2.2-2.5
General Government Gross Debt (in % of GDP) 18.521.624.025.927.5
Inflation Rate (%) n/a10.
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) -1.100.771.151.070.96
Current Account (in % of GDP) -

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

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

Source: World Bank, 2015


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Latest Update: February 2024