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DISCOVER BUSINESS AND INVESTMENT OPPORTUNITIES IN ESTONIA!

Sources:

Estonian economy

Considerations for the investor:

  • A small Nordic country, having close economic ties with Scandinavia and Western Europe
  • A favourable geographic location on the Baltic Sea, a region of intense economic activities and growth potential with good access to Russia, the CEE countries and the EU region
  • Member of both the EU and NATO starting from spring 2004
  • Member of WTO
  • Member of the Economic and Monetary Union starting from January 2011

After regaining independence from the Soviet Union, Estonia has been among the most advanced emerging markets in Central and Eastern Europe, mostly thanks to the success of its socio-economic reforms over the last fifteen years. Estonia has a liberal market-based economy. The government has pursued balanced budgets and low public debt.

Oil shale-based energy production, telecommunications and IT products, textiles, chemical products, banking, food and fishing, timber and wood products, shipbuilding, electronics, transportation and various services remain key sectors of the Estonian economy. Estonia produces nearly all of the energy needed for the country, supplying over 90% of its electricity needs with locally mined oil shale. Alternative energy sources such as wood, peat, and biomass contribute approximately 9% of primary energy production.

Transport and telecommunications are well developed in Estonia. An efficient road network covers the whole of Estonia, though the quality of some secondary roads remains below western standards. There is a well-developed rail connection between Estonia and Russia. In combination with the well-located ice-free ports in the northern part of the country (the Port of Muuga near Tallinn being the largest), Estonia has served as a major transit corridor between the West and East. Estonia is connected to the international flight network via its international airport in Tallinn, serving direct flights to numerous European cities.

Estonia’s economy has displayed considerable aptitude in increasing efficiency. Post-recession adjustments have laid the foundation for productivity-based growth, so productivity per employee is likely to reach a historical high in 2012. Nevertheless, since productivity growth will not fully offset the rapid fall in employment, the volume of the economy will remain below pre-crisis levels even in 2012. Some sectors have not seen considerable improvements from the standstill of the slump. Irrespective of the recovery, the economy is still displaying signs of fragility.

Estonia’s economy has exited recession on the back of increasing exports. Our main trading partners enjoyed faster-than-anticipated growth in the first half of the year of 2010, which contributed to an upturn in Estonia’s economy as well. However, the current growth impetus in foreign trade will be short-lived, since global recovery is losing momentum after a post-crisis pickup.

Estonia's role in the economic policy of the European Union will increase after becoming a member of the euro area. Estonia will also participate in making decisions on fiscal policy of the EU, including setting key interest rates in the euro area. Until now Estonia has, so to speak, automatically introduced the euro area interest rates through the fixed exchange rate of the Estonian kroon. Euro area membership also involves a rise in Estonia's credibility for foreign investors. The risk of the kroon devaluation will disappear all along, the businesses will no longer need to invest in exchange risk hedging, and travelling will be more convenient.

Development of the Estonian economy (GDP growth %)

Key economic indicators 2002-2009

Key Indicators20022003200420052006200720082009
Population as of 1 January (million)1.36*1.36*1.35*1.35*1.361.351.34*1.34
GDP at current prices (billion EUR)7.78.79.711.213.415.816.113.9
Real growth of GDP (%)7.97.67.29.410.66.9-5.1-13.9
GDP per capita at current prices (EUR)5 7136 4307 1788 3069 96611 79612 01310 341
GDP per capita (PPS) (EU-27=100)5054576266706863
Annual FDI (million EUR)306.8822.2770.82 307.31 431.81 997.61 317.41 204.2
FDI stock, as of 31 December (million EUR)4 0355 5537 3749 5399 66011 33211 64811 268
FDI stock per capita, as of 31 December (EUR)2 9674 0835 4627 0667 1558 3948 6938 409
Consumer price index compared to previous year (%)3.61.33.04.14.46.610.4-0.1
Unemployment rate** (%)10.310.09.77.95.94.75.513.8
Average monthly wage (EUR)393430466516601725825784
Current account balance (% of GDP)-10.6-11.3-11.3-10.0-15.3-17.2-9.74.5
Deficit (-)/Surplus of state budget (% of GDP)1.12.41.71.62.52.6-2.8-1.7
Export (billion EUR)***3.6424.0034.7696.1837.6398.0218.4526.477
Import (billion EUR)***5.0795.7156.7038.20410.56411.31810.8707.308
Trade balance (billion EUR)***-1.437-1.712-1.934-2.021-2.925-3.297-2.418-831
Total government expenditures (% of GDP)35.834.834.033.633.634.339.844.9
* Based on the 2000 Population Census
** Unemployed/labour force according to ILO methodology;
*** Trade figures shown in special trade system
(e) Estimated value

Sources: Population Register, Bank of Estonia, Ministry of Finance, Statistical Office of Estonia, Eurostat

Cornerstones of Economic Success:

  • Monetary reform - Since January 2011 euro - Estonia is a member of the Economic and Monetary Union
  • Privatization - completed, 5 infrastructure companies in state ownership
  • Liberal foreign trade regime - market is open for competition (Up until May 1st 2004 no import taxes, quotas, tariffs)
  • Modern Tax system - motivating, transparent, simple

The World Bank "Doing Business in 2010" report places Estonia on 24th rank among 181 countries, because:

  • starting a business is easy,
  • taxation is simple and transparent,
  • investors feel secure,
  • trading across borders is active,
  • communication is easy,
  • flexible job regulation,
    but:
  • too many local government units.

Starting a Business:

  • Number of procedures - 5
  • Minimum starting capital of most wide-used company form (PLC) - only 2500 EUR
  • From the beginning of 2011 registering a new PLC can be done without share capital payment at the start. Share capital can be paid later on.
  • Since 2007 - electronic registering via Company Registration Portal - max 2 hours
  • Companies can be 100% foreign owned
  • Business registry is publicly available: https://ariregister.rik.ee

Company registration

More information about Estonian economy: