Estonia is considered one of the most liberal economies in the world, ranking 14th in the Heritage Foundation's 2011 Economic Freedom Index. Its 2011 score was 0.5 points higher than in 2010 due to significant improvements in Estonia’s monetary and labor freedoms. Hallmarks of Estonia's market-based economy have included a balanced budget, a flat-rate income tax system (the first in the world), a fully convertible currency pegged to the euro (until 2011, when Estonia adopted the euro), a competitive commercial banking sector, and a hospitable environment for foreign investment, including no tax on reinvested corporate profits (tax is not levied unless a distribution is made).
Estonia's liberal economic policies and macroeconomic stability have fostered exceptionally strong growth and better living standards than those of most new EU member states. After enjoying 8% average annual GDP growth since 2000, the economy started to show signs of cooling in 2007, followed by a sharp drop in GDP during the global recession. Estonia's economy began growing again in the fourth quarter of 2009 and saw modest growth through 2010. Although unemployment is currently 14.4%, the Estonian Government kept budget deficits low and successfully joined the euro zone on January 1, 2011. Estonia became the 17th member of the euro zone.
The economy benefits from strong electronics and telecommunications sectors; the country is so wired that it is nicknamed E-stonia. Bars and cafes across the country are typically equipped with wireless connections. Skype, designed by Estonian developers, offers free calls over the Internet to millions of people worldwide. Tourism has also driven Estonia's economic growth, with Tallinn’s beautifully restored old town a major European tourist destination.
Estonia is a net exporter of electricity, using locally mined oil shale to fire its power plants. However, it imports all of its natural gas and most petroleum (roughly 30% of total energy consumption) from Russia. Alternative energy sources such as wood, peat, and biomass make up about 9% of primary energy production, and Estonia is developing wind farms for clean, renewable energy. An undersea electricity cable inaugurated in December 2006 allows Estonia to export electricity to Finland. Estonia and Finland plan to complete a second undersea cable in 2014.
Estonia is part of the European Union, and its trade policy is conducted in Brussels. By the late 1990s, Estonia's trade regime was so liberal that adoption of EU and World Trade Organization (WTO) norms required Estonia to impose tariffs in certain sectors, such as agriculture, which had previously been tariff-free. Openness to trade, rapid growth in investment, and an appreciating real exchange rate resulted in large trade deficits from 2000 to 2008.
Estonia's economy benefits from its location at the crossroads of East and West. Estonia lies just south of Finland and across the Baltic Sea from Sweden, both EU members. To the east are the huge potential markets of northwest Russia. Estonia's modern transportation and communication links provide a safe and reliable bridge for trade with the former Soviet Union and Nordic countries. Many observers also see a potential role for Estonia as a future link in the supply chain from the Far East into the EU.
Estonia's business attitude toward the United States is positive, and business relations between the two countries are increasing. The primary competition for American companies in the Estonian marketplace is European suppliers, especially Finnish and Swedish companies.
Total U.S. exports to Estonia in 2009 were $123 million, forming 1% of total Estonian imports. Principal imports from the United States were machinery; photo, medical, or surgical instruments; electronic equipment; and aircraft parts. Estonian exports to the United States were around $439 million in 2009 (3.9% of total exports), making the U.S. Estonia's third-largest export market after the EU and Russia. U.S. imports from Estonia are primarily mineral fuels and oils; electronic machinery; games and sports equipment; and photo, medical, or surgical instruments.
Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed at the U.S. Department of Commerce's
and at the U.S. Embassy in Tallinn's website at
. They also can be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRAD(E) or by fax at 1-202-482-4473.
GDP (2010): $19.2 billion.
Real GDP growth rate (2010): 3.1%.
Per capita GDP (2010): $14,344.
Inflation (2010): 3%.
Unemployment rate (2010): 16.9%.
Natural resources: Oil shale, phosphorus, limestone, blue clay.
Agriculture (2.5% of 2010 GDP): Products--livestock production (milk, meat, eggs) and crop production (cereals and legumes, potatoes, forage crops). Arable land--433,100 hectares.
Industry (28.7% of 2010 GDP): Types--engineering, electronics, wood and wood products, and textiles.
Services (68.8% of 2010 GDP): Transit, information technology (IT), telecommunications, business services, retail, construction, real estate.
Public sector (20.6% of 2010 GDP): Public services, education, healthcare, social services.
Trade: Exports (2010)--$11.6 billion. Partners--Finland 17%, Sweden 15.6%, Latvia 9%, Russia 9.7%, Germany 5.2%, Lithuania 4.9%, U.S. 3.8%. Imports (2010)--$12.3 billion. Partners--Finland 14.9%, Germany 11.3%, Sweden 10.9%, Lithuania 7.7%, Latvia 10.9%, Russia 8.3%.
Currency: Estonia adopted the euro in January 2011.
Foreign direct investment (March 2011): Sweden 34.7%, Finland 22.9%, Netherlands 9.6%, Norway 2.5%, Russia 3.8%, U.K. 1.8%, Cyprus 2.9%, Denmark 1.8%, Germany 2.3%, Luxembourg 1.9%, France 1.9%, U.S. 1.9%.