DISCOVER BUSINESS AND INVESTMENT OPPORTUNITIES IN ESTONIA!

Sources:

Estonian economy

Considerations for the investor:

  • A small Nordic country, having close economic ties with Scandinavia and Western Europe
  • A favourable geographic location on the Baltic Sea, a region of intense economic activities and growth potential with good access to Russia, the CEE countries and the EU region
  • Member of both the EU and NATO starting from spring 2004
  • Member of WTO

Development of the Estonian economy (GDP growth %)

After regaining independence from the Soviet Union, Estonia has been among the most advanced emerging markets in central and Eastern Europe, mostly thanks to the success of its socio-economic reforms over the last fifteen years. Estonia has a liberal market-based economy. The government has pursued balanced budgets and low public debt.

Oil shale-based energy production, telecommunications and IT products, textiles, chemical products, banking, food and fishing, timber and wood products, shipbuilding, electronics, transportation and various services remain key sectors of the Estonian economy. Estonia produces nearly all of the energy needed for the country, supplying over 90% of its electricity needs with locally mined oil shale. Alternative energy sources such as wood, peat, and biomass contribute approximately 9% of primary energy production.

Transport and telecommunications are well developed in Estonia. An efficient road network covers the whole of Estonia, though the quality of some secondary roads remains below western standards. There is a well-developed rail connection between Estonia and Russia. In combination with the well-located ice-free ports in the northern part of the country (the Port of Muuga near Tallinn being the largest), Estonia has served as a major transit corridor between the West and East. Estonia is connected to the international flight network via its international airport in Tallinn, serving direct flights to numerous European cities.

The Estonian economy is undergoing a rapid period of change. Estonia's external demand suffered a serious setback due to the global economic crisis, and this, in conjunction with domestic imbalances that emerged during the years of rapid growth, brought along a profound downturn. The volume of the Estonian economy has contracted by nearly 20% compared to its peak and the worst of the recession is over by now. The economy will start to stabilise, but sustained recovery is going to take time.

The resumption of economic activity will be led by the exporting sector and it is going to be uneven across sectors. Thus, the revival of external demand is of vital importance to the Estonian economy. The adoption of the euro is a significant economic policy step to support the economy in several ways. Postponement of the changeover would exert a drag on the recovery of growth.

Companies 2008: 60,630* / 44,800 **
GDP 2008: 15.85 bln EUR
GDP per capita 2008: 11,800 EUR
GDP per capita by PPP 2008: 14,500 EUR
GDP per capita by PPP: 72% of EU average


* registered companies in overall
** active companies, which declared turnover and have at least 1 employee

Cornerstones of Economic Success:

  • Monetary reform - since 1992 currency board arrangement
  • (fixed exchange rate 1 Euro = 15.65 Kroons)
  • Privatization - completed, 4 infrastructure companies in state ownership
  • Liberal foreign trade regime - market is open for competition
  • Modern Tax system - motivating, transparent, simple

The World Bank "Doing Business in 2010" report places Estonia on 24th rank among 181 countries, because:

  • starting a business is easy,
  • taxation is simple and transparent,
  • investors feel secure,
  • trading across borders is active,
  • communication is easy,
    but:
  • firing workers was not easy.

Starting a Business:

  • Number of procedures - 5
  • Minimum starting capital of most wide-used company form (Ltd.) - only 2550 EUR
  • Since 2007 - electronic registering - max 2 hours
  • Companies can be 100% foreign owned
  • Business registry is public

Key economic indicators 2003-2008

  2003

2004

2005

2006

 2007

2008

GDP
In current prices (EUR billion) 8.69 9.65 11.09 13.10 15.27 15.86
Real growth (%) 7.1 7.5 9.2 10.4 6.3 -3.6
Prices
Consumer price index (%) 1.3 3.0 4.1 4.4 6.6 10.4
Estonian kroon real effective exchange rate index (REER) (%) 1.7 1.3 1.1 0.4 2.9 4.7
Labour market and wages
Unemployment rate (%) 10.0 9.7 7.9 5.9 4.7 5.5
Average monthly gross wages and salaries (EUR) 430 466 516 601 725 825
General government budget
Revenue (EUR billion) 3.09 3.52 4.12 5.06 6.05 N/A
Expenditure (EUR billion) 2.90 3.37 3.94 4.63 5.60 N/A
Balance (+/-) (EUR billion) 0.20 0.15 0.18 0.43 0.45 N/A
Foreign trade (special trade system)
Exports (EUR billion) 4.00 4.77 6.20 7.72 8.04 8.45
Imports (EUR billion) 5.72 6.70 8.23 10.71 11.43 10.87
Balance of payments
Current account balance (EUR billion) -0.99 -1.13 -1.11 -2.19 -2.76 -1.51
Current account balance/GDP (%) -11.3 -11.3 -10.0 -16.9 -17.9 -9.4
Foreign direct investment inflow (EUR billion) 0.82 0.77 2.30 1.43 1.96 1.32
Foreign direct investment outflow (EUR billion) -0.14 -0.22 -0.56 -0.88 -1.15 0.72
International investment position (at end of year)
International investment position (EUR billion) -5.74 -8.29 -9.47 -9.80 -11.48 -12.10
Direct investment in Estonia (EUR billion) 5.55 7.37 9.54 9.66 11.33 11.31
Gross external debt (EUR billion) 5.60 7.34 9.55 12.80 17.17 19.05

N/A - information is not available yet

Source: Bank of Estonia, Statistical Office of Estonia, Ministry of Finance
More detailed forecast of the Estonian Economy see on the website of Bank of Estonia www.eestipank.info/frontpage/en

More information about Estonian economy: