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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.

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 , October 2021

Country Risk

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Main Sectors of Industry

Agriculture accounts for only 2% of the country's GDP and employs around 3% of the workforce (World Bank, latest data available). With rich reserves of shale oil, Estonia draws a considerable part of its energy production (around 60%) from this resource, which gives it self-sufficiency in terms of electricity. Arable land and permanent crops cover almost 1 million ha, with 2.4 million ha under forest and 226 ha of organic crops. The main crops include cereals, potatoes and vegetables. According to the latest figures from Statistics Estonia, in 2022 total cereal production increased by 18.9% y-o-y (to 1.5 million tonnes), while the total agricultural output reached EUR 1.63 billion, up by 44.4%. In November 2022, the EU approved the Common Agricultural Policy strategic plan for Estonia for the 2023-2027 period, designed to shape the transition to a sustainable, resilient and modern agricultural sector.

The industrial sector represents around 23.1% of the GDP and accounts for 29% of total employment. The main industrial subsectors are the food industry (dairy products and meat processing), electronics & IT (a traditional sector), and the chemical and wood processing industries. Altogether, the manufacturing sector alone contributes to an estimated 13% of the country’s GDP (World Bank) and is export-oriented: in 2022, 67.4% of the total production of manufacturing was sold to foreign markets. Preliminary figures from Statistics Estonia show that in 2022, industrial production fell by 1.9% due to weaker performance in the second half of the year. Production decreased by 2.7% overall in the manufacturing sector.

The services sector is the most developed (in particular transport and logistics, biotechnology and financial services) and accounts for roughly 62.5% of the Estonian GDP, employing 68% of the active population. The ICT segment shows the strongest performance, accounting for around 7% of total GDP and almost 6% of total employment (the country invested in this sector and created the TalTech’s School of Information Technologies and the Centre of Excellence in ICT Research - EXCITE). Concerning the country’s banking sector, it comprises 14 banks, of which nine are licensed credit institutions in Estonia and five are operating as branches of foreign credit institutions. The sector is dominated by foreign capital holding more than 80% of assets. The market is chiefly divided between Swedbank, SEB Bank, LHV Bank and Luminor Bank (data European Banking Federation).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.7 29.0 68.3
Value Added (in % of GDP) 2.5 24.0 61.5
Value Added (Annual % Change) -24.9 -3.0 0.1

Source: World Bank - Latest available data.

Monetary Indicators 20162017201820192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.890.850.890.88

Source: World Bank - Latest available data.



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%.

Foreign Trade Values 20182019202020212022
Imports of Goods (million USD) 19,14018,02517,32323,65226,228
Exports of Goods (million USD) 17,01716,10116,34021,54122,405
Imports of Services (million USD) 5,6065,7706,2478,3658,826
Exports of Services (million USD) 7,8918,0576,5529,76211,420

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 145.9143.8138.5157.0171.6
Trade Balance (million USD) -1,436-1,035-279-1,535-2,793
Trade Balance (Including Service) (million USD) 8421,249-44-178-249
Imports of Goods and Services (Annual % Change)
Exports of Goods and Services (Annual % Change) 2.96.1-5.319.95.0
Imports of Goods and Services (in % of GDP) 71.669.969.278.786.1
Exports of Goods and Services (in % of GDP) 74.373.969.378.385.5

Source: World Bank ; Latest available data

Foreign Trade Forecasts 2023 (e)2024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) -
Volume of imports of goods and services (Annual % change) -

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

International Economic Cooperation
Estonia belongs to about 180 international organizations. Estonia has bilateral investment promotion and protection agreements with the USA, Switzerland, Germany, Great Britain, the Czech republic, Austria, Ukraine, Belgium and Luxembourg.

Main Partner Countries

Main Customers
(% of Exports)
Finland 14.1%
Latvia 13.6%
Sweden 8.9%
Lithuania 5.9%
Germany 5.6%
See More Countries 52.0%
Main Suppliers
(% of Imports)
Germany 9.4%
Finland 9.1%
China 8.8%
Lithuania 6.7%
Poland 5.4%
See More Countries 60.6%

Source: Comtrade, Latest Available Data



Political Outline

Current Political Leaders
President: Alar KARIS (since 11 October 2021)
Prime Minister: Kaja KALLAS (since 26 January 2021)
Next Election Dates
Presidential: 2026
Parliament: March 2023
Main Political Parties
Estonia has a multi-party system. Political parties often work together to form coalition governments. The major political forces in the country are:

- Reform Party: centre-right, conservative liberalism, largest represented political faction
- Estonian Centre Party (K): centre-left, populist, has always secured parliamentary representation following independence. It is part of the ruling coalition
- Conservative People's Party of Estonia (EKRE): national conservatism, Estonian nationalism. It is part of the ruling coalition
- Isamaa (I): national conservatism, Christian democracy. It is part of the ruling coalition
- Social Democratic Party (SDE): centre-left, promotes social democracy.
Executive Power
The President is the chief of the state and is elected by the parliament for a five-year term (renewable once). The President is the commander-in-chief of the armed forces. He/she nominates the Prime Minister after approval by the parliament (generally the leader of the majority party or coalition), for a 4-year term. The Prime Minister is the head of the government and also holds the executive powers, which include the implementation of the law in the country and running the day-to-day affairs. The Council of Ministers is appointed by the Prime Minister and approved by the parliament.
Legislative Power
The legislature in Estonia is unicameral. The parliament is called State Assembly (or Riigikogu), it has 101 seats with its members elected by popular vote to serve four-year terms. The State Assembly is the highest organ of state authority. It initiates and approves legislation sponsored by the Prime Minister. The government is directly or indirectly dependent on the support of the parliament, often expressed through a vote of confidence. The government cannot dissolve the parliament but can recommend the same to President who has to take parliament into confidence before taking a decision. The citizens of Estonia enjoy considerable political rights. Estonia is among the world's leaders in e-governance and features an impressively transparent system in which government decisions are almost instantly made available on the internet.

The Judiciary is independent in Estonia, and generally free from government influence. The main source of the law is the Constitution of June 1992. The legal system is based on the civil law system. No judicial review of legislative acts takes place in the country. Estonia being a member of the European Union, the national law in the country needs to comply with the conditions of the Community legislation. Estonia accepts compulsory ICJ jurisdiction, but with reservations.



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.