Estonia: Country fact sheet

Content Type
Country Data and Maps
Institution
Economist Intelligence Unit
Abstract
No abstract is available.
Topic
Summary, Economy, Background, Fact sheet
Political Geography
Estonia

Fact sheet

Annual data 2020a Historical averages (%) 2016-20
Population (m) 1.3 Population growth 0.2
GDP (US$ m; market exchange rate) 31,005 Real GDP growth 3.0
GDP (US$ m; purchasing power parity) 52,105 Real domestic demand growth 4.1
GDP per head (US$; market exchange rate) 23,330 Inflation 1.8
GDP per head (US$; purchasing power parity) 39,207 Current-account balance (% of GDP) 1.1
Exchange rate (av) €:US$ 0.88b FDI inflows (% of GDP) 6.0
a Economist Intelligence Unit estimates. b Actual.

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Background: Estonia regained independence in 1991. The first post-independence government established a free-market economy. Despite the instability of successive coalition governments-the current government is the 15th since independence-Estonia has pursued policies that are economically liberal and open to foreign investment. On January 26th 2021 the centre-right Reform Party and the Centre Party agreed to form a governing coalition after the previous coalition collapsed amid a corruption scandal. The new prime minister is Kaja Kallas from Reform, which is the largest party in the parliament. Ms Kallas is the country's first ever female prime minister.

Political structure: Estonia has a unicameral legislature, the Riigikogu, with 101 members who are chosen in direct elections by proportional representation. The president is the head of state, but most governmental powers rest within parliament. The president is indirectly elected, either by members of parliament or, if parliament cannot muster sufficient votes for the leading candidate, by an electoral college comprising members of parliament and local government representatives.

Policy issues: Estonia joined the euro zone in January 2011. The country's underlying macroeconomic environment is stable, but near-term uncertainty has increased with the onset of the coronavirus pandemic. Policy in the short run will therefore focus on addressing the public health emergency and the associated economic fallout. In the medium term, government reforms will turn to the major policy issues weighing on the Estonian economy, such as demographic decline and population ageing, anti-money-laundering controls and improving the business environment. Progress is expected in upgrading transport and energy infrastructure, as well as in strengthening work incentives among older workers. Estonia's openness to foreign investment and commitment to free trade will be tempered by the EU's tightening of screening procedures for foreign direct investment and by rising protectionism globally. Policy will continue to focus on reducing dependence on Russian energy, given the deterioration in EU-Russia relations since 2014.

Taxation: Estonia has a reputation for a competitive and straightforward tax system, comprising a flat personal income tax rate of 20%, a corporate tax regime that only taxes distributed profits at 20% and a land-value form of property tax. Value-added tax (VAT) is levied at 20%.

Foreign trade: Estonia has an open economy. In 2019 exports of goods and services accounted for almost 65% of GDP. In 2019 goods exports totalled US$14.9bn and imports US$15.9bn. The current account registered a surplus of US$616m.

Major exports 2019 % of total Major imports 2019 % of total
Machinery & equipment 23.6 Machinery & equipment 22.7
Timber products 12.8 Chemicals 14.2
Mineral products 11.9 Mineral products 13.0
Foodstuffs 9.5 Foodstuffs 10.1
       
Leading markets 2019 % of total Leading suppliers 2019 % of total
Finland 16.3 Finland 12.6
Sweden 10.5 Germany 10.1
Latvia 9.1 Lithuania 9.6
US 6.8 Sweden 9.4

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