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
- The 4th freest economy in Europe
- 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.
Estonia stands out as a European leader in digital innovation, with particular strengths in IT, including global firsts such as e-residency, internet voting, a secure digital ID system, and a thriving startup ecosystem that has produced multiple tech unicorns, including Skype, Wise, and Bolt. The country also performs strongly in the green energy transition and ranks among the regional leaders in digital governance, business environment, and technological readiness.
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 only 2.2% of the GDP and employs around 3.5% of the workforce. With rich reserves of shale oil, Estonia draws a very large part of its energy production (about 80%) from this resource, which gives it self-sufficiency in terms of electricity production. Arable land and permanent crops cover roughly 1.1 million ha, with 2 million ha under forest. The main crops include cereals, potatoes and vegetables.
The industrial sector represents around 23.6% of the GDP and accounts for 29.6% of total employment. The main industrial subsectors are the food industry (dairy products and meat processing), which accounts for over 15% of manufacturing, and electronics & IT (a traditional sector). The manufacturing of computers, electronic and optical equipment represents around 75% of the sector’s turnover. The remaining 25% is attributable to the manufacture of electrical equipment. Other traditional industries are chemicals (which accounts for 6% of manufacturing) and the wood processing industry (this sector accounts for more than 20% of manufacturing. Wooden houses have become a major export subsector). Altogether, the manufacturing sector alone contributes an estimated 12.9% to the country’s GDP.
The services sector is the most developed (in particular transport and logistics, biotechnology and financial services) and accounts for roughly 60.4% of the Estonian GDP, employing around 66.2% of the active population. The ICT sector shows the strongest performance, accounting for around 7% of total GDP and 4% 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).
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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