Economic Overview

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 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.

Foreign Trade

Estonia is considered one of the most liberal countries in the world and is very open to trade, which represents 157% of GDP (World Bank, latest edition). In 2022, the country mainly exported mineral products (19%), electrical equipment (13%), wood (11%), and agricultural products (10%); while the main imports comprised mineral products (20%), electrical equipment (11%), machinery and mechanical appliances (10%), and base metals and related articles (10% - data Statistics Estonia).

In 2022, the country’s major trading partners were Finland (15% of total exports), Latvia (14%) and Sweden (9%). The top partner countries for Estonia’s imports of goods were Finland (16% of total imports), Lithuania, Germany, and Latvia (all three accounting for 10% - data Statistics Estonia). The biggest decrease occurred in imports from Belarus and Russia (down by EUR 484 million and 293 million, respectively) due to the ongoing conflict in Ukraine and the EU sanctions that followed. Overall, the EU accounted for 70% of total exports and 78% of imports.

Estonia's merchandise trade balance is structurally negative. According to figures from WTO, in 2021 the country exported goods worth USD 21.5 billion (+26.7% y-o-y), while imports totalled USD 23.6 billion (+36.1%). In terms of services, Estonia is a net exporter: in 2021 exports reached USD 9.9 billion against USD 8.2 billion in imports. According to the World Bank, the country’s trade balance was negative by 0.4% of GDP. According to figures from the national statistics agency, exports of goods increased by 17% and imports by 23% in 2022 vis-à-vis 2021. Their value was estimated at USD 21.2 billion and 24.5 billion, respectively. Re-exports from Estonia grew by 42%, while exports of domestic goods increased by 7% so that the share of goods of Estonian origin in total exports was 66%.

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic), please consult the country's dedicated section in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.