Estonia
A small and heavily forested country
The northernmost of the three Baltic states
A regional leader in IT services with a vibrant startup ecosystem
Total area: 45,226 sq km
Population: 1.2 million
Government type: Parliamentary democracy
Administrative division: 15 counties (called “maakond”)
Capital + other major cities: Tallinn (394,000) + Tartu (101,000), Narva (66,000), Kohlta-Järve (46,000), Parnu (44,000)
Currency: Euro (since January 2011)
Languages: Estonian (official) 68.5%, Russian 29.6%, Ukrainian 0.6%, other 1.2%
Ethnicity: Estonian 68.7%, Russian 24.9%, Ukrainian 1.7%, Belarusian 1%, Finn 0.6%, other 1.6%, unspecified 1.6%
Religion: Evangelical Lutheran 9.9%, Orthodox 16.2%, other Christian (including Methodist, Seventh-Day Adventist, Roman Catholic, Pentecostal) 2.2%, none 54.1%, unspecified 16.7%
President: (Mr.) Alar KARIS (since 11 October 2021)
Prime Minister: (Mr.) Kristen MICHAL (since July 23, 2024)
Date of EU accession: 1 May 2004
KEY FEATURES
- The least populous country in Central and Eastern Europe (CEE)
- Advanced, high-income economy
- One of the most digitally connected countries in Europe
- More than 99% of financial transactions in Estonia occurr digitally
- Ranked among the global leaders in digital development, having pioneered blockchain use since 2008
- 5th in Europe in the Index of Economic Freedom
- Highest number of startups per capita in Europe, with multiple unicorns
- Free public transport for residents of the capital, Tallinn
MACROECONOMIC OVERVIEW
Estonia, a member of the European Union since 2004 and the eurozone since 2011, has a modern, market-driven economy with one of the highest per capita income levels in Central Europe and the Baltic region. Successive Estonian governments have remained firmly committed to free-market principles, business-friendly policies, and an innovation-oriented environment. This has resulted in sound fiscal management, consistently balanced or near-balanced budgets, and one of the lowest public debt levels in the EU (currently standing at just 18.4% of GDP). The economy benefits from strong commercial and financial ties to the Nordic countries, particularly Finland and Sweden.
After rapid gains in the early 2000s, earning Estonia the nickname “the Baltic Tiger”, economic growth moderated in the 2010s due to adverse regional developments, notably EU sanctions on Russia and retaliatory Russian counter-sanctions. As exports to Russia declined, GDP growth became increasingly driven by strong domestic demand and rising wages. The COVID-19 pandemic led to a mild contraction of around 3% in 2020, but Estonia rebounded swiftly, aided by its highly digitalized, service-oriented economy.
In 2022, the Russian invasion of Ukraine triggered a sharp economic downturn. Estonia, which had previously maintained significant trade with Russia, swiftly aligned with EU sanctions. The resulting loss of key export markets, combined with a surge in energy prices, drove inflation close to 20% (among the highest in the EU) reducing household purchasing power and pushing the economy into recession through 2023 and into 2024.
Modest recovery is expected, with GDP growth projected at 1.5% in 2025 and 2.3% in 2026. To address a growing fiscal deficit and rising defense expenditures, the government adopted fiscal consolidation measures by increasing VAT, income, and dividend taxes. These measures have affected consumption and contributed to inflation levels slightly higher than those seen in other Baltic countries.
Selected economic indicators, Estonia, 2018 - 2024
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | ||
| GDP |
|
|
|
|
|
|
|
|
| Real GDP growth |
%
|
3.7 | 3.7 | -2.9 | 8.3 | -1.2 | -2.7 | -0.1 |
| GDP at current prices |
€ bn
|
26.04 | 27.73 | 27.46 | 31.44 | 36.18 | 37.6 | 39.8 |
| Foreign trade |
|
|
|
|
|
|
|
|
| Exports |
€ bn
|
18.10 | 19.33 | 19.09 | 24.68 | 30.93 | 29.53 | 30.15 |
| Imports |
€ bn
|
18.42 | 19.23 | 18.97 | 24.6 | 31.14 | 29.3 | 30.03 |
| Balance |
€ bn
|
0.915 | 1.119 | 0.12 | 0.08 | -0.2 | 0.2 | 0.12 |
| Prices |
|
|
|
|
|
|
|
|
| CPI – average inflation rate |
%
|
3.4 | 2.3 | -0.6 | 4.5 | 19.4 | 9.1 | 3.7 |
| PPI – industry – average |
%
|
7.1 | 1.6 | -3.5 | 19.3 | 38.6 | -2.7 | -3.0 |
| Employment |
|
|
|
|
|
|
|
|
| Registered unemployment |
%
|
5.4 | 4.5 | 6.9 | 6.2 | 5.6 | 6.4 | 7.6 |
| Average monthly gross wage |
€
|
1,309 | 1,551 | 1448 | 1,548 | 1,645 | 1,832 | 1,981 |
Source: Statistics Estonia, IMF, Eurostat, World Bank, OECD, 2018-2024
STRUCTURE OF ECONOMY - KEY SECTORS
Agriculture accounts for about 2.2% of Estonia’s GDP and employs approximately 3.5% of the workforce. The country is one of Europe’s most forested nations. The main agricultural products include cereals (especially barley, wheat, and oats), potatoes, and various vegetables. Estonia’s agricultural sector is modern and export-oriented, with a strong focus on environmentally sustainable practices.
Estonia’s economy successfully combines both traditional and innovative sectors. While established industries such as food processing, wood, and metal manufacturing continue to make substantial contributions to the country’s GDP, modern sectors such as ICT and tech start-ups are playing an increasingly vital role. Estonia is also the leading exporter of wooden houses in Europe and ranks among the top global producers of shale oil. The industrial sector represents around 29.2% of the GDP and accounts for 29.6% of total employment.
The services sector is the most developed (in particular transport and logistics, biotechnology, and financial services) and accounts for roughly 68% of the Estonian GDP, employing around 70% of the active population.
ICT & Tech sector
Estonia is widely recognized as a digital frontrunner in the European Union and was the first country in the world to introduce online voting already in 2005. The country consistently ranks among the leaders in digital public services for both citizens and businesses (such as e-residency and secure digital ID systems), supported by excellent digital infrastructure and a highly skilled workforce. The ICT sector plays a pivotal role in Estonia’s economy, accounting for nearly 9% of GDP, and the country leads the EU in the share of ICT graduates, with women making up 38%. Estonia also boasts a vibrant start-up ecosystem, producing the highest number of unicorns per capita in Europe, including globally recognized companies such as Skype, Wise, and Bolt.
Electronics and electrical equipment
Estonia's electronics and electrical equipment manufacturing sector is one of the country’s most dynamic and fastest-growing industries, serving as a cornerstone of advanced manufacturing and the export economy, with 84% of its output sold abroad. The industry comprises over 230 companies, employing approximately 12,000 people. Manufacturing of computers, electronic, and optical equipment accounts for around 75% of the sector’s turnover, while the remaining 25% comes from the production of electrical equipment. The sector plays a significant role in international trade, representing about 15% of Estonia’s total exports.
Wood processing industry
Estonia offers favorable natural conditions for the wood and furniture sector, with forests covering 51% of the country’s territory, making it one of Europe’s most forested nations. The sector is a key pillar of the Estonian economy, employing around 31,500 people and accounting for 4.5% of the total workforce. Nearly one-fifth of the country’s exports consist of wood products, and Estonia has become Europe’s largest exporter of prefabricated wooden houses. The country has also emerged as a pioneer in digital transformation within the forestry sector, implementing AI technologies to boost production capacity and reduce material waste.
Energy
Energy is a distinctive component of Estonia’s economy. The country holds Europe’s largest commercially exploited shale oil reserves. Historically, 70–80% of its electricity has been generated from oil shale, making Estonia unique in both energy self-sufficiency and the carbon intensity of its energy mix. However, the country is actively transitioning to renewable energy and has significantly increased the share of wind and biomass in its electricity generation over the past decade. Estonia has set ambitious goals to phase out oil shale and expand offshore wind capacity by 2030.
Food industry
The main industrial subsector in Estonia is the food industry, which employs around 15,000 people across approximately 700 companies. Despite its relatively small size, the sector is highly modernized and productive. About one-third of Estonia’s food production is exported, and the broader food sector contributes roughly 8% to the national GDP. Estonia also has a long tradition of food science and innovation. More recently, the country has been emerging as a hub for food technology, driven by close collaboration between the agri-food industry and Estonia’s globally recognized IT sector. At the same time, Estonia is developing niche export segments, including organic and value-added products such as health foods and artisanal or craft foods. Estonia’s share of organic farmland is among the highest in the EU (22.8% of its total agricultural land).
EXPORTS & IMPORTS
Estonia’s export/GDP ratio at 80.5% is the tenth highest in Europe. Main exporting products are machinery and electrical equipment, mineral products, wood and wood products, agricultural products and chemicals.
2023 export and import data:
Main import partners:
Germany – 11.1%
China – 9.3%
Finland – 8.6%
Other Europe, nes – 6.7%
Lithuania – 6.6%
Main export partners:
Finland – 15.4%
Latvia – 11.6%
Sweden – 9.1%
Lithuania – 8.1%
Germany – 6.4%
Russian Federation – 5.9%
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