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Economy of Estonia

Estonia is a member of the European Union and of the eurozone and, according to the IMF, an advanced economy.

Estonia moved away from Communism in the late 1980s and became an independent capitalist economy in 1991, it emerged as a pioneer of the global economy. In 1994, it became one of the first countries in the world to adopt a flat tax, with a uniform rate of 26% regardless of personal income. Between 2005 and 2008, the personal income tax rate was reduced from 26% to 21% in several steps.

In 2008, Estonia was ranked 12th of 162 countries in the Index of Economic Freedom 2008, the best of any former Soviet republic. The same year, the country was on bottom of Europe by labour market freedom, but the government is drafting improvements. Estonia is 21st on the Ease of Doing Business Index 2013 by the World Bank Group.

Nevertheless, long-term prospects for the Estonian economy remain among the most promising in Europe. In 2011, the real GDP growth in Estonia was 8.0%, and according to the projections made by the CEPII, by 2025 the GDP per capita could rise to the level of Nordic economies of Sweden, Finland, Denmark, and Norway. According to the same projections, by 2050, Estonia could become the most productive country in the EU, after Luxembourg, and thus join the top five most productive nations in the world.

Estonian economy was one of the fastest growing in the world until 2006 with growth rates even exceeding 10% annually. Despite some concerns both in and outside of the country, the Estonian economy and its currency remained highly resilient and solvent.

Until recent years, the Estonian economy has continued to grow with admirable rates. Estonian GDP grew by 6.4% in the year 2000 and with double digit speeds after accession to the EU in 2004. The GDP grew by 7.9% in 2007 alone. Increases in labour costs, rise of taxation on tobacco, alcohol, electricity, fuel, and gas, and also external pressures (growing prices of oil and food on the global market) are expected to raise inflation just above the 10% mark in the first months of 2009.

In the first quarter 2008, GDP grew only 0.1%. The government made a supplementary negative budget, which was passed by the Riigikogu. The revenue of the budget was decreased for 2008 by EEK 6.1 billion and the expenditure by EEK 3.2 billion.

Estonia today is mainly influenced by developments in Finland, Russia, Sweden and Germany - the four main trade partners. The government recently greatly increased its spending on innovation. The prime minister from the Estonian Reform Party has stated its goal of bringing Estonian GDP per capita into the top 5 of the EU by 2022. However, the GDP of Estonia decreased by 1.4% in the 2nd quarter of 2008, over 3% in the 3rd quarter of 2008, and over 9% in the 4th quarter of 2008. The Estonian economy further contracted by 15.1% in the first quarter of 2009. Low domestic and foreign demand have depressed the economy's overall output. The Estonian economy's 33.7% industrial production drop was the sharpest decrease in industrial production in the entire European Union.


Tallinn has emerged as a financial center for Estonians and Russian Russians alike. According to Invest in Estonia, advantages of Estonian financial sector are unbureaucratic cooperation between companies and authorities, and relative abundance of educated people although young educated Estonians tend to emigrate to western Europe for greater income.

Estonian service sector employs over 60% of workforce. Estonia has a strong information technology (IT) sector, partly due to the Tiigrihüpe project undertaken in mid-1990s, and has been mentioned as the most "wired" and advanced country in Europe in the terms of e-government.

Farming, collectivized until 20 years ago, has become privatized, more efficient, and the farming area has increased recently.

The mining industry makes up 1% of the GDP. Mined commodities include oil shale, peat, and industrial minerals, such as clays, limestone, sand and gravel.

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Economy Of Estonia"

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