Economy of Estonia
Encyclopedia
Estonia
is a member of the European Union
and the eurozone
and is an advanced economy, according to the IMF.
Before the Second World War Estonia's economy was based on agriculture
, but there was a significant knowledge sector (with Tartu known for scientific contributions) and a growing industrial sector, similar to Finland. Products such as butter
, milk
and cheese
were widely known on the western European market
s. Main markets were Germany and United Kingdom, and only 3% of all commerce was with the neighbouring USSR.
The USSR's forcible annexation of Estonia in 1940 and the ensuing Nazi
and Soviet
destruction during World War II crippled the Estonian economy. Post-war
Sovietization
of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure. Estonia and Finland
had about the same GDP per capita before Estonia became a planned economy. By 1987, the capitalist Finland's GDP per capita was 14,370 USD and the communist Estonia's GDP per capita was around 2,000 USD.
After Estonia moved away from socialism in the late 1980s and became an independent capitalist economy in 1991, Estonia emerged as a pioneer in the global economy. In 1994, Estonia became one of the first countries in the world to adopt a flat tax
, with a uniform rate of 26% regardless of personal income. In January 2005 the personal income tax rate was reduced to 24%. A subsequent reduction to 23% followed in January 2006. In 2007 the tax rate was lowered to 22% and in 2008 to 21%. The rate was frozen in 2009. Estonia received more foreign investment per capita in the second half of the 1990s than any other country in Central and Eastern Europe. Estonia has been fast catching up with the EU-15, having grown GDP per capita from 34.8% of the EU-15 average in 1996 to 65% in 2007, similar to Central Europe. Estonia is already rated a high income country by the World Bank
. The Estonian economic miracle has been termed a Baltic Tiger
.
Estonia is ranked 12th of 162 countries in the Index of Economic Freedom
2008, the best of any former communist country from the Soviet Union. Estonia is on bottom of Europe by labour market freedom, but the government is drafting improvements. Estonia is 17th on the Ease of Doing Business Index
2011 by World Bank Group
. The Government of Estonia finalized the design of Estonian euro coins
in late 2004, and adopted the euro
as the country's currency on 1 January 2011, later than planned due to continued high inflation
. The Estonian kroon was pegged to the Euro at a rate of 1 EUR = 15.64664 EEK.
The Financial Crisis of 2008 seriously affected the Estonian economy, primarily as a result of an investment and consumption slump following the bursting of the real estate market bubble which had been building up during 2004. Estonia had the E.U.'s worst year for unemployment. Unemployment in May 2009 rose to 15.6% from 3.9% a year earlier. Nonetheless, Estonia has weathered the crisis relatively well.
Thereafter, through many centuries until 1920, Estonian agriculture
consisted of native peasants working large feudal-type estates held by ethnic German landlord
s. In the decades prior to independence, centralised Czarist rule had created a rather large industrial sector dominated by the world's largest cotton mill
. The new Estonian state inherited a ruined post-war economy, and an inflated ruble currency
. In years 1920 to 1930, Estonia entirely transformed its economy, despite considerable hardship, dislocation, and unemployment. Compensating the German landowners for their holdings, the government confiscated the estates and divided them into small farms which subsequently formed the basis of Estonian prosperity.
By 1929, a stable currency, the kroon
, was established. It was issued by the Bank of Estonia
, the country's central bank
. Trade focused on the local market and the West, particularly Germany and the United Kingdom. Only 3% of all commerce was with the U.S.S.R.
The U.S.S.R.'s forcible annexation of Estonia in 1940 and the ensuing Nazi
and Soviet
destruction during World War II
crippled the Estonian economy. Post-war Sovietisation of life continued with the integration of Estonia's economy and industry into the U.S.S.R.'s centrally planned structure. More than 56% of Estonian farms were collectivised
in the month of April 1949 alone. Moscow expanded on those Estonian industries which had locally available raw materials, such as oil shale
mining and phosphorites. As a laboratory for economic experiments, especially in industrial management techniques, Estonia enjoyed more success and greater prosperity than other regions under Soviet rule. During the Soviet era and especially by the end of it in 1990, Estonia had the highest Human Development Index from all the Soviet states.
area. A balanced budget, almost non-existent public debt, flat-rate income tax
, free trade
regime, fully convertible currency
backed by currency board
and a strong peg to the euro
, competitive commercial banking sector, hospitable environment for foreign investment, innovative e-Services
and even mobile-based services are all hallmarks of Estonia's free-market-based economy. Estonia also has made excellent progress in regard to structural adjustment
.
In June 1992, Estonia replaced the ruble
with its own freely convertible currency, the kroon
(EEK). A currency board
was created and the new currency was pegged to the German Mark at the rate of 8 Estonian kroons for 1 Deutsche Mark. When Germany introduced the euro
the peg was changed to 15.6466 kroons for 1 euro. Estonia was set to adopt the euro in 2008 but due to high inflation rates the adoption date was delayed to 2011. On 1 January 2011, Estonia adopted the euro and became the 17th eurozone
member state.
The privatisation of state-owned firms is virtually complete, with only the port and the main power plants remaining in government hands. The constitution requires a balanced budget, and the protection afforded by Estonia's intellectual property laws is on a par of that of Europe's. In early 1992 both liquidity problems and structural weakness stemming from the communist era precipitated a banking crisis. As a result, effective bankruptcy legislation was enacted and privately owned, well-managed banks emerged as market leaders. Today, near-ideal conditions for the banking sector exist. Foreigners are not restricted from buying bank shares or acquiring majority holdings.
Tallinn
's fully electronic stock exchange
opened in early 1996 and was bought out by Finland's Helsinki Stock Exchange
in 2001. It is estimated that the unregistered economy provides almost 12% of annual GDP.
Until recent years the Estonian economy continued to grow with admirable rates. Estonian GDP grew by 6.4% in the year 2000 and with double speeds after accession to the EU in 2004. The GDP grew by 7.9% in 2007 alone. Increases in labor 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 Riigikogu
. The revenue of the budget was decreased for 2008 by EEK 6.1 billion and the expenditure by EEK 3.2 billion.
Estonia joined the World Trade Organization in 1999. A sizable current account deficits remains, but started to shrink in the last months of 2008 and is expected to do so in the near future.
In the first quarter of 2011, the average monthly gross wage in Estonia was 792 € (12,392 kroons
, U.S. $1,125.2).
Estonia is nearly energy independent supplying over 90% of its electricity needs with locally mined oil shale
. Alternative energy sources such as wood, peat, and biomass make up approximately 9% of primary energy production. Estonia imports needed petroleum
products from western Europe and Russia. Oil shale
energy, telecommunications, textiles, chemical products, banking, services, food and fishing, timber, shipbuilding, electronics, and transportation are key sectors of the economy. The ice-free port of Muuga
, near Tallinn
, is a modern facility featuring good transshipment capability, a high-capacity grain elevator, chill/frozen storage, and brand-new oil tanker off-loading capabilities. The railroad serves as a conduit between the West, Russia, and other points to the East.
After a long period of very high growth of GDP, the GDP of Estonia decreased by a little over 3% on a yearly basis in the 3rd quarter of 2008. In the 4th quarter of 2008 the negative growth was already −9,4%. Some international experts and journalists, who like to view the three Baltic states as a single economic identity, have failed to notice that Estonia has constantly performed better than Lithuania
and Latvia
on many fundamental indicators. Still, in 2009 Estonia was one of the five worst performing economies in the world in terms of annual GDP growth rate. The current account deficit and inflation is lower than in Latvia, the GDP per capita is higher than in Latvia and Lithuania, Estonia's public debt is a very low 3.8% of GDP and government reserves are close to 10% of GDP. The difference is exemplified by the fact that in December 2008 Estonia became one of the donor countries to the IMF lead rescue package for Latvia
.
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
.
was increased from 18% to 20%. On 9 August 2011, just days after Standard & Poor's
downgraded the credit rating of the United States, it raised Estonia's rating from A to AA-. Among the factors S&P cited as contributing to its decision was confidence in Estonia's ability to "sustain strong economic growth."
Estonia has around 600,000 employees, yet the country has a shortage of skilled labor, and since skill shortages are experienced everywhere in Europe, the government has increased working visa quota for non-EEA
citizens, although it has nevertheless been criticized for being inadequate to address skill shortage challenges.
The late-2000's recession in the world, the near-concurrent local property bust with changes in Estonian legislation to increase labour market flexibility (making it easier for companies to lay off workers) saw Estonia's unemployment rate shoot up to 18.8% throughout the duration of the crisis, then stabilise to 13.8% by Summer 2011, as the economy recovers on the basis of strong exports (as internal consumption and, thus imports, plummeted) and cuts in public finances.
Some of the reduction in unemployment has been attributed to some Estonians' travelling abroad (Finland, UK, Australia and elsewhere) for work.
, SEB Eesti Ühispank
, Eesti Telekom
, Tallink Grupp
, Olympic Entertainment Group, Tallinna Sadam, Tele2 Eesti
, Sampo Pank
, Tallinna Kaubamaja, Merko Grupp, BLRT Grupp
, Elisa
, Tallinna Vesi, Transgroup Invest, Eesti Raudtee
, Kunda Nordic Tsement, Viru Keemia Grupp
, Falck Baltics, and Pro Kapital Grupp. In terms of 2003 sales, the 20 largest companies included Kesko Food
, Stora Enso Timbe
, EMT
, Elion Ettevõtted, Eesti Põlevkivi
, Silberauto, Toyota Baltic, Eesti Statoil
, Rakvere Lihakombinaat, Lukoil Eesti
, Kreenholmi Valduse, and Eesti Gaas
. Estonian Institute of Economic Research publishes top company awards in various categories, where Estonian small and medium size companies take many top positions.
Tallinn
has emerged as a financial center. According to Invest in Estonia, advantages of Estonian financial sector are low taxes, unbureaucratic cooperation between companies and authorities, and educated people. The largest banks are Hansabank
, SEB
, Nordea
, and Sampo Bank
. Several IPOs have been made recently on the Tallinn Stock Exchange
, a member OMX
system. Estonia is ranked 21st of 121 countries in the Capital Access Index 2005 by Milken Institute, outperforming Austria and Italy among others. The rent levels of new office spaces in Tallinn starts at 15 euros per square meter or 2000 euro sale price, with demand exceeding supply.
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 year ago, has become privatized, more efficient, and the farming area has increased recently. The share of agriculture
in the gross domestic product decreased from 15% to 3.3% during 1991–2000, while employment in agriculture decreased from 15% to 5.2%. Mining industry makes 1% of the GDP. Mined commodities include oil shale
, peat
, and industrial minerals, such as clay
s, limestone
, sand
and gravel
. Soviets created badly polluting industry in the early 1950s, concentrated in North East Estonia. Socialist economy and military areas left Estonia highly polluted, and mainly because of oil shale industry
in East-Virumaa, sulphur dioxide emissions per person is almost as high as in Czech Republic. The coastal seawater is polluted in certain locations, mainly in East-Estonia. The government is looking for ways to reduce pollution further. In 2000 the emissions were 80% smaller than in 1980 and the amount of unpurified wastewater discharged to water bodies was one twentieth the level of 1980.
Estonian productivity is growing fast, and consequently wages are rising fast, with around 8% rise in private consumption in 2005. According to Estonian Institute of Economic Research, the largest contributors to GDP growth in 2005 were processing industry, financial intermediation, retailing and wholesale trade, transport and communications.
port
s offer easy navigational access, deep waters, and good ice conditions. There are 12 airports and 1 heliport
in Estonia. Lennart Meri Tallinn Airport is the largest airport in Estonia, with 1,73 million passengers and 22,764 tons of cargo (annual cargo growth 119,7%) in 2007. International flight companies such as SAS
, Finnair
, Lufthansa
, EasyJet
, and Estonian Air
provide direct flights to 27 destinations.
Approximately 7.5% of the country’s workforce
is employed in transportation and the sector contributes over 10% of GDP. Estonia is getting much business from traffic between Europe and Russia, especially oil cargo through Estonian ports. Transit trade's share of GDP is disputed, but many agree that Russia's increased hostility is decreasing the share.
Instead of coal, companies are encouraged to burn oil shale
, with stations mainly in Narva
making around 75% of the country's energy. Other energy sources are natural gas
imported from Russia, wood
, motor fuel
s, and fuel oil
s. Wind power in Estonia
amounts to 58.1 megawatts, whilst roughly 399 megawatts worth of projects are currently being developed. Estonian energy liberalization is lagging far behind the Nordic energy market
. During the accession negotiations with the EU, Estonia agreed that at least 35% of the market are opened before 2009 and all of non-household market, which totals around 77% of consumption, before 2013. Estonia is concerned that Russia could use energy markets to bully it. The government is considering granting permits to nuclear power companies and there are plans for a shared nuclear facility with Latvia and Lithuania.
Internet connections are available throughout most of the country and Estonia has a high Internet penetration.
Estonia exports machinery and equipment (33% of all exports annually), wood and paper (15% of all exports annually), textiles (14% of all exports annually), food
products (8% of all exports annually), furniture (7% of all exports annually), and metal
s and chemical products. Estonia also exports 1.562 billion kilowatt hours of electricity
annually. Estonia imports machinery and equipment (33.5% of all imports annually), chemical products (11.6% of all imports annually), textiles (10.3'% of all imports annually), food products (9.4% of all imports annually), and transportation equipment (8.9% of all imports annually). Estonia imports 200 million kilowatt hours of electricity annually.
Estonia
Estonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
is a member of the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
and the eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
and is an advanced economy, according to the IMF.
Before the Second World War Estonia's economy was based on agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
, but there was a significant knowledge sector (with Tartu known for scientific contributions) and a growing industrial sector, similar to Finland. Products such as butter
Butter
Butter is a dairy product made by churning fresh or fermented cream or milk. It is generally used as a spread and a condiment, as well as in cooking applications, such as baking, sauce making, and pan frying...
, milk
Milk
Milk is a white liquid produced by the mammary glands of mammals. It is the primary source of nutrition for young mammals before they are able to digest other types of food. Early-lactation milk contains colostrum, which carries the mother's antibodies to the baby and can reduce the risk of many...
and cheese
Cheese
Cheese is a generic term for a diverse group of milk-based food products. Cheese is produced throughout the world in wide-ranging flavors, textures, and forms....
were widely known on the western European market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
s. Main markets were Germany and United Kingdom, and only 3% of all commerce was with the neighbouring USSR.
The USSR's forcible annexation of Estonia in 1940 and the ensuing Nazi
Nazism
Nazism, the common short form name of National Socialism was the ideology and practice of the Nazi Party and of Nazi Germany...
and Soviet
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
destruction during World War II crippled the Estonian economy. Post-war
Post-war
A post-war period or postwar period is the interval immediately following the ending of a war and enduring as long as war does not resume. A post-war period can become an interwar period or interbellum when a war between the same parties resumes at a later date...
Sovietization
Sovietization
Sovietization is term that may be used with two distinct meanings:*the adoption of a political system based on the model of soviets .*the adoption of a way of life and mentality modelled after the Soviet Union....
of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure. Estonia and Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
had about the same GDP per capita before Estonia became a planned economy. By 1987, the capitalist Finland's GDP per capita was 14,370 USD and the communist Estonia's GDP per capita was around 2,000 USD.
After Estonia moved away from socialism in the late 1980s and became an independent capitalist economy in 1991, Estonia emerged as a pioneer in the global economy. In 1994, Estonia became one of the first countries in the world to adopt a flat tax
Flat tax
A flat tax is a tax system with a constant marginal tax rate. Typically the term flat tax is applied in the context of an individual or corporate income that will be taxed at one marginal rate...
, with a uniform rate of 26% regardless of personal income. In January 2005 the personal income tax rate was reduced to 24%. A subsequent reduction to 23% followed in January 2006. In 2007 the tax rate was lowered to 22% and in 2008 to 21%. The rate was frozen in 2009. Estonia received more foreign investment per capita in the second half of the 1990s than any other country in Central and Eastern Europe. Estonia has been fast catching up with the EU-15, having grown GDP per capita from 34.8% of the EU-15 average in 1996 to 65% in 2007, similar to Central Europe. Estonia is already rated a high income country by the World Bank
World Bank Group
The World Bank Group is a family of five international organizations that makes leveraged loans, generally to poor countries.The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary...
. The Estonian economic miracle has been termed a Baltic Tiger
Baltic Tiger
Baltic Tiger is a term used to refer to any of the three Baltic states of Estonia, Latvia, and Lithuania during their periods of economic boom, which started after the year 2000 and continued until 2006–2007...
.
Estonia is ranked 12th of 162 countries in the Index of Economic Freedom
Index of Economic Freedom
The Index of Economic Freedom is a series of 10 economic measurements created by The Heritage Foundation and The Wall Street Journal. Its stated objective is to measure the degree of economic freedom in the world's nations....
2008, the best of any former communist country from the Soviet Union. Estonia is on bottom of Europe by labour market freedom, but the government is drafting improvements. Estonia is 17th on the Ease of Doing Business Index
Ease of Doing Business Index
The Ease of Doing Business Index is an index created by the World Bank. Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights...
2011 by World Bank Group
World Bank Group
The World Bank Group is a family of five international organizations that makes leveraged loans, generally to poor countries.The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary...
. The Government of Estonia finalized the design of Estonian euro coins
Estonian euro coins
Estonian euro coins feature a single design for all eight coins. This is a design by Lembit Lõhmus and features a silhouette map of Estonia together with the word Eesti and twelve stars, symbolic of the European Union, surrounding the map...
in late 2004, and adopted the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
as the country's currency on 1 January 2011, later than planned due to continued high inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
. The Estonian kroon was pegged to the Euro at a rate of 1 EUR = 15.64664 EEK.
The Financial Crisis of 2008 seriously affected the Estonian economy, primarily as a result of an investment and consumption slump following the bursting of the real estate market bubble which had been building up during 2004. Estonia had the E.U.'s worst year for unemployment. Unemployment in May 2009 rose to 15.6% from 3.9% a year earlier. Nonetheless, Estonia has weathered the crisis relatively well.
Early history
Until the early 13th century, the territory that is now known as Estonia was independent. The economy was largely an agricultural one, but Estonia being a country with a long coastline, there were also many maritime activities. Autonomous development was brought to an end by the Northern Crusades undertaken by the King of Denmark, the German Livonian and the Teutonic military orders. The Estonian world was transformed by military conquest. The war against the invaders lasted from 1208–1227. The last Estonian county to fall was the island of Saaremaa in 1261.Thereafter, through many centuries until 1920, Estonian agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
consisted of native peasants working large feudal-type estates held by ethnic German landlord
Landlord
A landlord is the owner of a house, apartment, condominium, or real estate which is rented or leased to an individual or business, who is called a tenant . When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner...
s. In the decades prior to independence, centralised Czarist rule had created a rather large industrial sector dominated by the world's largest cotton mill
Cotton mill
A cotton mill is a factory that houses spinning and weaving machinery. Typically built between 1775 and 1930, mills spun cotton which was an important product during the Industrial Revolution....
. The new Estonian state inherited a ruined post-war economy, and an inflated ruble currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
. In years 1920 to 1930, Estonia entirely transformed its economy, despite considerable hardship, dislocation, and unemployment. Compensating the German landowners for their holdings, the government confiscated the estates and divided them into small farms which subsequently formed the basis of Estonian prosperity.
By 1929, a stable currency, the kroon
Estonian kroon
In 1992, coins were introduced in denominations of 5, 10, 20 & 50 senti, as well as 1 kroon. The 1 kroon was struck in cupronickel, the others in aluminum-bronze. However, in 1997, nickel-plated steel 20 senti were introduced, followed by aluminum-bronze 1 kroon in 1998. 5 senti coins were not...
, was established. It was issued by the Bank of Estonia
Bank of Estonia
The Bank of Estonia , is the central bank of Estonia, which is a member of the European Union organisation and the European System of Central Banks...
, the country's central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
. Trade focused on the local market and the West, particularly Germany and the United Kingdom. Only 3% of all commerce was with the U.S.S.R.
The U.S.S.R.'s forcible annexation of Estonia in 1940 and the ensuing Nazi
Nazism
Nazism, the common short form name of National Socialism was the ideology and practice of the Nazi Party and of Nazi Germany...
and Soviet
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
destruction during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
crippled the Estonian economy. Post-war Sovietisation of life continued with the integration of Estonia's economy and industry into the U.S.S.R.'s centrally planned structure. More than 56% of Estonian farms were collectivised
Collective
A collective is a group of entities that share or are motivated by at least one common issue or interest, or work together on a specific project to achieve a common objective...
in the month of April 1949 alone. Moscow expanded on those Estonian industries which had locally available raw materials, such as oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
mining and phosphorites. As a laboratory for economic experiments, especially in industrial management techniques, Estonia enjoyed more success and greater prosperity than other regions under Soviet rule. During the Soviet era and especially by the end of it in 1990, Estonia had the highest Human Development Index from all the Soviet states.
Modernisation and liberalisation
Since reestablishing independence, Estonia has styled itself as the gateway between East and West and aggressively pursued economic reform and integration with the West. Estonia's market reforms put it among the economic leaders in the former COMECONComecon
The Council for Mutual Economic Assistance , 1949–1991, was an economic organisation under hegemony of Soviet Union comprising the countries of the Eastern Bloc along with a number of communist states elsewhere in the world...
area. A balanced budget, almost non-existent public debt, flat-rate income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
, free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
regime, fully convertible currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
backed by currency board
Currency board
A currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exchange rate target....
and a strong peg to the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
, competitive commercial banking sector, hospitable environment for foreign investment, innovative e-Services
E-Services
The concept of E-service , represents one prominent application of utilizing the use of Information and communication technologies in different areas. However, providing an exact definition of e-service is hard to come by as researchers have been using different definitions to describe e-service...
and even mobile-based services are all hallmarks of Estonia's free-market-based economy. Estonia also has made excellent progress in regard to structural adjustment
Structural adjustment
Structural adjustments are the policies implemented by the International Monetary Fund and the World Bank in developing countries. These policy changes are conditions for getting new loans from the International Monetary Fund or World Bank, or for obtaining lower interest rates on existing loans...
.
In June 1992, Estonia replaced the ruble
Russian ruble
The ruble or rouble is the currency of the Russian Federation and the two partially recognized republics of Abkhazia and South Ossetia. Formerly, the ruble was also the currency of the Russian Empire and the Soviet Union prior to their breakups. Belarus and Transnistria also use currencies with...
with its own freely convertible currency, the kroon
Estonian kroon
In 1992, coins were introduced in denominations of 5, 10, 20 & 50 senti, as well as 1 kroon. The 1 kroon was struck in cupronickel, the others in aluminum-bronze. However, in 1997, nickel-plated steel 20 senti were introduced, followed by aluminum-bronze 1 kroon in 1998. 5 senti coins were not...
(EEK). A currency board
Currency board
A currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exchange rate target....
was created and the new currency was pegged to the German Mark at the rate of 8 Estonian kroons for 1 Deutsche Mark. When Germany introduced the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
the peg was changed to 15.6466 kroons for 1 euro. Estonia was set to adopt the euro in 2008 but due to high inflation rates the adoption date was delayed to 2011. On 1 January 2011, Estonia adopted the euro and became the 17th eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
member state.
The privatisation of state-owned firms is virtually complete, with only the port and the main power plants remaining in government hands. The constitution requires a balanced budget, and the protection afforded by Estonia's intellectual property laws is on a par of that of Europe's. In early 1992 both liquidity problems and structural weakness stemming from the communist era precipitated a banking crisis. As a result, effective bankruptcy legislation was enacted and privately owned, well-managed banks emerged as market leaders. Today, near-ideal conditions for the banking sector exist. Foreigners are not restricted from buying bank shares or acquiring majority holdings.
Tallinn
Tallinn
Tallinn is the capital and largest city of Estonia. It occupies an area of with a population of 414,940. It is situated on the northern coast of the country, on the banks of the Gulf of Finland, south of Helsinki, east of Stockholm and west of Saint Petersburg. Tallinn's Old Town is in the list...
's fully electronic stock exchange
Tallinn Stock Exchange
The Tallinn Stock Exchange is a stock exchange operating in Tallinn, Estonia. It is one of the OMX Exchanges, which also operates Helsinki Stock Exchange and Stockholm Stock Exchange and is the only regulated exchange in Estonia. It has a pre-market session from 09:00 to 10:00, a normal trading...
opened in early 1996 and was bought out by Finland's Helsinki Stock Exchange
Helsinki Stock Exchange
The Helsinki Stock Exchange is a stock exchange located in Helsinki, Finland. Since 3 September 2003 it has been part of OMX, referred to as OMX Helsinki . Since NASDAQ's acquisition of OMX in February 2008, the official name of the Helsinki exchange has been NASDAQ OMX Helsinki.- History :The...
in 2001. It is estimated that the unregistered economy provides almost 12% of annual GDP.
The economy today
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 continued to grow with admirable rates. Estonian GDP grew by 6.4% in the year 2000 and with double speeds after accession to the EU in 2004. The GDP grew by 7.9% in 2007 alone. Increases in labor 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 Riigikogu
Riigikogu
The Riigikogu is the unicameral parliament of Estonia. All important state-related questions pass through 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 joined the World Trade Organization in 1999. A sizable current account deficits remains, but started to shrink in the last months of 2008 and is expected to do so in the near future.
In the first quarter of 2011, the average monthly gross wage in Estonia was 792 € (12,392 kroons
Estonian kroon
In 1992, coins were introduced in denominations of 5, 10, 20 & 50 senti, as well as 1 kroon. The 1 kroon was struck in cupronickel, the others in aluminum-bronze. However, in 1997, nickel-plated steel 20 senti were introduced, followed by aluminum-bronze 1 kroon in 1998. 5 senti coins were not...
, U.S. $1,125.2).
Estonia is nearly energy independent supplying over 90% of its electricity needs with locally mined oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
. Alternative energy sources such as wood, peat, and biomass make up approximately 9% of primary energy production. Estonia imports needed petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
products from western Europe and Russia. Oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
energy, telecommunications, textiles, chemical products, banking, services, food and fishing, timber, shipbuilding, electronics, and transportation are key sectors of the economy. The ice-free port of Muuga
Port of Muuga
The Port of Muuga is the largest cargo port in Estonia, located on the southern coast of the Gulf of Finland, 13 km northeast of the capital Tallinn, in Maardu. It is one of the few ice-free ports in northernmost Europe....
, near Tallinn
Tallinn
Tallinn is the capital and largest city of Estonia. It occupies an area of with a population of 414,940. It is situated on the northern coast of the country, on the banks of the Gulf of Finland, south of Helsinki, east of Stockholm and west of Saint Petersburg. Tallinn's Old Town is in the list...
, is a modern facility featuring good transshipment capability, a high-capacity grain elevator, chill/frozen storage, and brand-new oil tanker off-loading capabilities. The railroad serves as a conduit between the West, Russia, and other points to the East.
After a long period of very high growth of GDP, the GDP of Estonia decreased by a little over 3% on a yearly basis in the 3rd quarter of 2008. In the 4th quarter of 2008 the negative growth was already −9,4%. Some international experts and journalists, who like to view the three Baltic states as a single economic identity, have failed to notice that Estonia has constantly performed better than Lithuania
Lithuania
Lithuania , officially the Republic of Lithuania is a country in Northern Europe, the biggest of the three Baltic states. It is situated along the southeastern shore of the Baltic Sea, whereby to the west lie Sweden and Denmark...
and Latvia
Latvia
Latvia , officially the Republic of Latvia , is a country in the Baltic region of Northern Europe. It is bordered to the north by Estonia , to the south by Lithuania , to the east by the Russian Federation , to the southeast by Belarus and shares maritime borders to the west with Sweden...
on many fundamental indicators. Still, in 2009 Estonia was one of the five worst performing economies in the world in terms of annual GDP growth rate. The current account deficit and inflation is lower than in Latvia, the GDP per capita is higher than in Latvia and Lithuania, Estonia's public debt is a very low 3.8% of GDP and government reserves are close to 10% of GDP. The difference is exemplified by the fact that in December 2008 Estonia became one of the donor countries to the IMF lead rescue package for Latvia
Latvia
Latvia , officially the Republic of Latvia , is a country in the Baltic region of Northern Europe. It is bordered to the north by Estonia , to the south by Lithuania , to the east by the Russian Federation , to the southeast by Belarus and shares maritime borders to the west with Sweden...
.
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
Estonian Reform Party
The Estonian Reform Party is a centre-right, free market liberal party in Estonia. It is led by Estonian Prime Minister Andrus Ansip, and has 33 members in the 101-member Riigikogu, making it the largest party in the legislature...
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
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
.
2009 Financial crisis impact
On July 2009 Estonian VATVat
Vat or VAT may refer to:* A type of container such as a barrel, storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...
was increased from 18% to 20%. On 9 August 2011, just days after Standard & Poor's
Standard & Poor's
Standard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...
downgraded the credit rating of the United States, it raised Estonia's rating from A to AA-. Among the factors S&P cited as contributing to its decision was confidence in Estonia's ability to "sustain strong economic growth."
Employment participation
European Economic Area
The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
citizens, although it has nevertheless been criticized for being inadequate to address skill shortage challenges.
The late-2000's recession in the world, the near-concurrent local property bust with changes in Estonian legislation to increase labour market flexibility (making it easier for companies to lay off workers) saw Estonia's unemployment rate shoot up to 18.8% throughout the duration of the crisis, then stabilise to 13.8% by Summer 2011, as the economy recovers on the basis of strong exports (as internal consumption and, thus imports, plummeted) and cuts in public finances.
Some of the reduction in unemployment has been attributed to some Estonians' travelling abroad (Finland, UK, Australia and elsewhere) for work.
Sectors
The 20 most valuable companies based on 2007 profit estimates by GILD are: Hansapank, Eesti EnergiaEesti Energia
Eesti Energia AS is a state-owned energy company in Estonia with its headquarters in Tallinn. The company operates in Estonia, Latvia, Lithuania, Finland and Jordan. In Estonia the company operates under the name Eesti Energia, while using the brand name Enefit for international operations...
, SEB Eesti Ühispank
SEB Eesti Ühispank
SEB is an Estonian bank, owned by the Swedish bank SEB. SEB is the second largest bank in Estonia and is the member of the international SEB Group. Until 11 April 2005 the name of the bank was Eesti Ühispank...
, Eesti Telekom
Eesti Telekom
AS Eesti Telekom is one of the largest telecommunication companies in the Baltics, member of TeliaSonera group. AS Eesti Telekom is a holding company registered and operating in the Republic of Estonia, whose subsidiaries provide telecommunications services.AS Eesti Telekom is not directly...
, Tallink Grupp
Tallink
Tallink is an Estonian shipping company currently operating Baltic Sea cruiseferries and ropax ships from Estonia to Finland, Estonia to Sweden, Latvia to Sweden and Finland to Germany. They also own Silja Line and a part of SeaRail...
, Olympic Entertainment Group, Tallinna Sadam, Tele2 Eesti
Tele2
Tele2 AB is a major European telecommunications operator, with about 34 million customers in 11 countries. It serves as a fixed-line telephone operator, cable television provider, mobile phone operator and Internet service provider.- Overview :...
, Sampo Pank
Sampo Bank
Sampo Bank is a brand name for Danske Bank's Finnish and Estonian operations. Sampo Bank was acquired by the Danske Bank Group in 2007.-History:...
, Tallinna Kaubamaja, Merko Grupp, BLRT Grupp
BLRT Grupp
BLRT Grupp is a shipbuilding company headquartered in Tallinn, Estonia. In addition to Estonia, the company owns shipyards in Lithuania, Finland and Norway...
, Elisa
Elisa Oyj
Elisa Oyj is a Finnish telecommunications company founded in 1882 that was known until July 2000 as HPY. Elisa Oyj employs about 3000 people and in 2007 had revenue of about €1.57 billion...
, Tallinna Vesi, Transgroup Invest, Eesti Raudtee
Eesti Raudtee
Eesti Raudtee or EVR is the national railway company of Estonia. It owns a network of 691 km of broad gauge railway throughout the country, including the 132 km used by the Elektriraudtee commuter trains around Tallinn...
, Kunda Nordic Tsement, Viru Keemia Grupp
Viru Keemia Grupp
Viru Keemia Grupp is an Estonian holding group of oil shale industry, power generation, and public utility companies.-Operations:VKG's two main areas of operations are shale oil extraction, and electricity and heat production and distribution....
, Falck Baltics, and Pro Kapital Grupp. In terms of 2003 sales, the 20 largest companies included Kesko Food
Kesko
Kesko is a Finnish retailing conglomerate. It is engaged in the food trade, the home and specialty goods trade, the building and home improvement trade, and the car and machinery trade...
, Stora Enso Timbe
Stora Enso
Stora Enso Oyj is a Finnish pulp and paper manufacturer, formed by the merger of Swedish mining and forestry products company Stora and Finnish forestry products company Enso-Gutzeit Oy in 1998. It is headquartered in Helsinki, and it has approximately 29,000 employees...
, EMT
EMT (mobile operator)
AS EMT is Estonia's and one of the largest Baltic's mobile operator. Founded on 28 April 1991 as an Estonian Swedish-Finnish joint company.Headquarter in Tallinn. Traded on NASDAQ OMX stock exchanges.- External links :* * *...
, Elion Ettevõtted, Eesti Põlevkivi
Eesti Põlevkivi
Eesti Energia Kaevandused is a subsidiary of Eesti Energia, an Estonian state-owned energy company. The core activity of Eesti Energia Kaevandused is oil-shale mining in the north-east of Estonia. The company has 3,150 employees...
, Silberauto, Toyota Baltic, Eesti Statoil
Statoil
Statoil ASA is a Norwegian petroleum company established in 1972. It merged with Norsk Hydro in 2007 and was known as StatoilHydro until 2009, when the name was changed back to Statoil ASA. The brand Statoil was retained as a chain of fuel stations owned by StatoilHydro...
, Rakvere Lihakombinaat, Lukoil Eesti
LUKoil
Lukoil/LUKoil ; ) is Russia's second largest oil company and its second largest producer of oil. In 2009, the company produced 97.615 million tons of oil; ....
, Kreenholmi Valduse, and Eesti Gaas
Eesti Gaas
Eesti Gaas AS is the Estonian natural gas company, which imports and sells natural gas and owns and operates Estonian natural gas transmission system. Eesti Gaas is owned by Gazprom , E.ON Ruhrgas , Fortum Oyj and Itera Latvija ....
. Estonian Institute of Economic Research publishes top company awards in various categories, where Estonian small and medium size companies take many top positions.
Tallinn
Tallinn
Tallinn is the capital and largest city of Estonia. It occupies an area of with a population of 414,940. It is situated on the northern coast of the country, on the banks of the Gulf of Finland, south of Helsinki, east of Stockholm and west of Saint Petersburg. Tallinn's Old Town is in the list...
has emerged as a financial center. According to Invest in Estonia, advantages of Estonian financial sector are low taxes, unbureaucratic cooperation between companies and authorities, and educated people. The largest banks are Hansabank
Hansabank
Hansabank was a bank operating in Estonia, Latvia, and Lithuania owned by the FöreningsSparbanken/Swedbank, a Swedish bank. Following a decision taken by the Swedbank group on 15 September 2008, the Hansabank name was discontinued in 2009 with all operations rebranded under the Swedbank...
, SEB
Skandinaviska Enskilda Banken
Skandinaviska Enskilda Banken AB is a Swedish financial group for corporate customers, institutions and private individuals with headquarters in Stockholm, Sweden. Its activities comprise mainly banking services, but SEB also carries out significant life insurance operations and also owns Eurocard...
, Nordea
Nordea
Nordea Bank AB is a Stockholm-based financial services group operating in Northern Europe. The bank is the result of the successive mergers and acquisitions of the Swedish, Finnish, Danish and Norwegian banks of Nordbanken, Merita Bank, Unibank and Kreditkassen that took place between 1997 and 2000...
, and Sampo Bank
Sampo Bank
Sampo Bank is a brand name for Danske Bank's Finnish and Estonian operations. Sampo Bank was acquired by the Danske Bank Group in 2007.-History:...
. Several IPOs have been made recently on the Tallinn Stock Exchange
Tallinn Stock Exchange
The Tallinn Stock Exchange is a stock exchange operating in Tallinn, Estonia. It is one of the OMX Exchanges, which also operates Helsinki Stock Exchange and Stockholm Stock Exchange and is the only regulated exchange in Estonia. It has a pre-market session from 09:00 to 10:00, a normal trading...
, a member OMX
OMX
OMX AB is a Swedish-Finnish financial services company, formed in 2003 through a merger between OM AB and HEX plc and is now a part of the NASDAQ OMX Group since February 2008.It has two divisions, OMX Exchanges, which operates eight stock exchanges mainly in the Nordic and Baltic...
system. Estonia is ranked 21st of 121 countries in the Capital Access Index 2005 by Milken Institute, outperforming Austria and Italy among others. The rent levels of new office spaces in Tallinn starts at 15 euros per square meter or 2000 euro sale price, with demand exceeding supply.
Estonian service sector employs over 60% of workforce. Estonia has a strong information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
(IT) sector, partly due to the Tiigrihüpe
Tiigrihüpe
Tiigrihüpe was a project undertaken by Republic of Estonia to heavily invest in development and expansion of computer and network infrastructure in Estonia, with a particular emphasis on education...
project undertaken in mid 1990s, and has been mentioned as the most "wired" and advanced country in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
in the terms of e-government.
Farming, collectivized until 20 year ago, has become privatized, more efficient, and the farming area has increased recently. The share of agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
in the gross domestic product decreased from 15% to 3.3% during 1991–2000, while employment in agriculture decreased from 15% to 5.2%. Mining industry makes 1% of the GDP. Mined commodities include oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
, peat
Peat
Peat is an accumulation of partially decayed vegetation matter or histosol. Peat forms in wetland bogs, moors, muskegs, pocosins, mires, and peat swamp forests. Peat is harvested as an important source of fuel in certain parts of the world...
, and industrial minerals, such as clay
Clay
Clay is a general term including many combinations of one or more clay minerals with traces of metal oxides and organic matter. Geologic clay deposits are mostly composed of phyllosilicate minerals containing variable amounts of water trapped in the mineral structure.- Formation :Clay minerals...
s, limestone
Limestone
Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera....
, sand
Sand
Sand is a naturally occurring granular material composed of finely divided rock and mineral particles.The composition of sand is highly variable, depending on the local rock sources and conditions, but the most common constituent of sand in inland continental settings and non-tropical coastal...
and gravel
Gravel
Gravel is composed of unconsolidated rock fragments that have a general particle size range and include size classes from granule- to boulder-sized fragments. Gravel can be sub-categorized into granule and cobble...
. Soviets created badly polluting industry in the early 1950s, concentrated in North East Estonia. Socialist economy and military areas left Estonia highly polluted, and mainly because of oil shale industry
Oil shale industry
Oil shale industry is an industry of mining and processing of oil shale—a fine-grained sedimentary rock, containing significant amounts of kerogen , from which liquid hydrocarbons can be manufactured. The industry has developed in Brazil, China, Estonia and to some extent in Germany, Israel and...
in East-Virumaa, sulphur dioxide emissions per person is almost as high as in Czech Republic. The coastal seawater is polluted in certain locations, mainly in East-Estonia. The government is looking for ways to reduce pollution further. In 2000 the emissions were 80% smaller than in 1980 and the amount of unpurified wastewater discharged to water bodies was one twentieth the level of 1980.
Estonian productivity is growing fast, and consequently wages are rising fast, with around 8% rise in private consumption in 2005. According to Estonian Institute of Economic Research, the largest contributors to GDP growth in 2005 were processing industry, financial intermediation, retailing and wholesale trade, transport and communications.
Infrastructure
Railway transport dominates the cargo sector, comprising 70% of all carried goods, domestic and international. Road transport is the one that prevails in the passenger sector, accounting for over 90% of all transported passengers. 5 major cargoCargo
Cargo is goods or produce transported, generally for commercial gain, by ship, aircraft, train, van or truck. In modern times, containers are used in most intermodal long-haul cargo transport.-Marine:...
port
Port
A port is a location on a coast or shore containing one or more harbors where ships can dock and transfer people or cargo to or from land....
s offer easy navigational access, deep waters, and good ice conditions. There are 12 airports and 1 heliport
Heliport
A heliport is a small airport suitable only for use by helicopters. Heliports typically contain one or more helipads and may have limited facilities such as fuel, lighting, a windsock, or even hangars...
in Estonia. Lennart Meri Tallinn Airport is the largest airport in Estonia, with 1,73 million passengers and 22,764 tons of cargo (annual cargo growth 119,7%) in 2007. International flight companies such as SAS
Scandinavian Airlines System
Scandinavian Airlines or SAS, previously Scandinavian Airlines System, is the flag carrier of Denmark, Norway and Sweden, and the largest airline in Scandinavia....
, Finnair
Finnair
Finnair Plc is the flag carrier and largest airline of Finland, with its headquarters on the grounds of Helsinki Airport in Vantaa, Finland, and its main hub at Helsinki Airport. Finnair and its subsidiaries dominate both the domestic and international air travel markets in Finland. The largest...
, Lufthansa
Lufthansa
Deutsche Lufthansa AG is the flag carrier of Germany and the largest airline in Europe in terms of overall passengers carried. The name of the company is derived from Luft , and Hansa .The airline is the world's fourth-largest airline in terms of overall passengers carried, operating...
, EasyJet
EasyJet
EasyJet Airline Company Limited is a British airline headquartered at London Luton Airport. It carries more passengers than any other United Kingdom-based airline, operating domestic and international scheduled services on 500 routes between 118 European, North African, and West Asian airports...
, and Estonian Air
Estonian Air
AS Estonian Air is Estonia's national carrier, owned by the Estonian state. The airline is based in Tallinn, Estonia. It is a regional airline feeding into the Scandinavian Airlines System network via Stockholm, Oslo and Copenhagen from Estonia....
provide direct flights to 27 destinations.
Approximately 7.5% of the country’s workforce
Workforce
The workforce is the labour pool in employment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic region like a city, country, state, etc. The term generally excludes the employers or management, and implies those involved in...
is employed in transportation and the sector contributes over 10% of GDP. Estonia is getting much business from traffic between Europe and Russia, especially oil cargo through Estonian ports. Transit trade's share of GDP is disputed, but many agree that Russia's increased hostility is decreasing the share.
Instead of coal, companies are encouraged to burn oil shale
Oil shale
Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced...
, with stations mainly in Narva
Narva
Narva is the third largest city in Estonia. It is located at the eastern extreme point of Estonia, by the Russian border, on the Narva River which drains Lake Peipus.-Early history:...
making around 75% of the country's energy. Other energy sources are natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
imported from Russia, wood
Wood
Wood is a hard, fibrous tissue found in many trees. It has been used for hundreds of thousands of years for both fuel and as a construction material. It is an organic material, a natural composite of cellulose fibers embedded in a matrix of lignin which resists compression...
, motor fuel
Motor fuel
A motor fuel is a fuel that is used to provide power to motor vehicles.Currently, the majority of motor vehicles worldwide are powered by gasoline or diesel. Other energy sources include ethanol, biodiesel, propane, compressed natural gas , electric batteries charged from an external source, and...
s, and fuel oil
Fuel oil
Fuel oil is a fraction obtained from petroleum distillation, either as a distillate or a residue. Broadly speaking, fuel oil is any liquid petroleum product that is burned in a furnace or boiler for the generation of heat or used in an engine for the generation of power, except oils having a flash...
s. Wind power in Estonia
Wind power in Estonia
Wind power in Estonia amounts to an installed capacity of 149 MW, whilst roughly 570 MW worth of projects are currently being developed. All wind farms as of now are on land, offshore farms are planned on Lake Peipus and in the Baltic Sea near the island of Hiiumaa.Pakri wind farm is located in...
amounts to 58.1 megawatts, whilst roughly 399 megawatts worth of projects are currently being developed. Estonian energy liberalization is lagging far behind the Nordic energy market
Nordic energy market
Nordic energy market is a common market for energy in Nordic countries. It is one of the first free energy markets in Europe and is traded in NASDAQ OMX Commodities Europe and Nord Pool Spot. In 2003, the largest market shares were as follows: Vattenfall 17%, Fortum 14.1%, Statkraft 8.9%, E.on...
. During the accession negotiations with the EU, Estonia agreed that at least 35% of the market are opened before 2009 and all of non-household market, which totals around 77% of consumption, before 2013. Estonia is concerned that Russia could use energy markets to bully it. The government is considering granting permits to nuclear power companies and there are plans for a shared nuclear facility with Latvia and Lithuania.
Internet connections are available throughout most of the country and Estonia has a high Internet penetration.
Trade
| Estonia | Export Export The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"... |
Import Import The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus... | |
|---|---|---|---|
| Finland Finland Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside... |
18.4% | 18.2% | |
| Sweden Sweden Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund.... |
12.4% | 9% | |
| Latvia Latvia Latvia , officially the Republic of Latvia , is a country in the Baltic region of Northern Europe. It is bordered to the north by Estonia , to the south by Lithuania , to the east by the Russian Federation , to the southeast by Belarus and shares maritime borders to the west with Sweden... |
8.9% | 5.7% | |
| Russia Russia Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects... |
8.1% | 13.1% | |
| Germany Germany Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate... |
5.1% | 12.4% | |
| Lithuania Lithuania Lithuania , officially the Republic of Lithuania is a country in Northern Europe, the biggest of the three Baltic states. It is situated along the southeastern shore of the Baltic Sea, whereby to the west lie Sweden and Denmark... |
4.8% | 6.4% |
Estonia exports machinery and equipment (33% of all exports annually), wood and paper (15% of all exports annually), textiles (14% of all exports annually), food
Food
Food is any substance consumed to provide nutritional support for the body. It is usually of plant or animal origin, and contains essential nutrients, such as carbohydrates, fats, proteins, vitamins, or minerals...
products (8% of all exports annually), furniture (7% of all exports annually), and metal
Metal
A metal , is an element, compound, or alloy that is a good conductor of both electricity and heat. Metals are usually malleable and shiny, that is they reflect most of incident light...
s and chemical products. Estonia also exports 1.562 billion kilowatt hours of electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
annually. Estonia imports machinery and equipment (33.5% of all imports annually), chemical products (11.6% of all imports annually), textiles (10.3'% of all imports annually), food products (9.4% of all imports annually), and transportation equipment (8.9% of all imports annually). Estonia imports 200 million kilowatt hours of electricity annually.
Natural resources
| Resource Natural resource Natural resources occur naturally within environments that exist relatively undisturbed by mankind, in a natural form. A natural resource is often characterized by amounts of biodiversity and geodiversity existent in various ecosystems.... | |Reserves Resource A resource is a source or supply from which benefit is produced, typically of limited availability.Resource may also refer to:* Resource , substances or objects required by a biological organism for normal maintenance, growth, and reproduction... |
|
|---|---|---|
| Oil-shale Oil shale Oil shale, an organic-rich fine-grained sedimentary rock, contains significant amounts of kerogen from which liquid hydrocarbons called shale oil can be produced... |
north-east | 1,137,700,000 mln t |
| Sea mud Bay mud Bay mud consists of thick deposits of soft, unconsolidated silty clay, which is saturated with water; these soil layers are situated at the bottom of certain estuaries, which are normally in temperate regions that have experienced cyclical glacial cycles... (medical) |
south | 1,356,400,000 mln t |
| Construction sand Sand Sand is a naturally occurring granular material composed of finely divided rock and mineral particles.The composition of sand is highly variable, depending on the local rock sources and conditions, but the most common constituent of sand in inland continental settings and non-tropical coastal... |
across the country | 166,700,000 mln m³ |
| Construction gravel Gravel Gravel is composed of unconsolidated rock fragments that have a general particle size range and include size classes from granule- to boulder-sized fragments. Gravel can be sub-categorized into granule and cobble... |
north | 32,800,000 mln m³ |
| Lake mud Bay mud Bay mud consists of thick deposits of soft, unconsolidated silty clay, which is saturated with water; these soil layers are situated at the bottom of certain estuaries, which are normally in temperate regions that have experienced cyclical glacial cycles... (medical) |
across the country | 1,133,300 mln t |
| Lake mud Bay mud Bay mud consists of thick deposits of soft, unconsolidated silty clay, which is saturated with water; these soil layers are situated at the bottom of certain estuaries, which are normally in temperate regions that have experienced cyclical glacial cycles... (fertilizer) |
east | 170,900 t |
| Ceramic clay Clay Clay is a general term including many combinations of one or more clay minerals with traces of metal oxides and organic matter. Geologic clay deposits are mostly composed of phyllosilicate minerals containing variable amounts of water trapped in the mineral structure.- Formation :Clay minerals... |
across the country | 10,600,000 mln m³ |
| Ceramsid clay Clay Clay is a general term including many combinations of one or more clay minerals with traces of metal oxides and organic matter. Geologic clay deposits are mostly composed of phyllosilicate minerals containing variable amounts of water trapped in the mineral structure.- Formation :Clay minerals... (for gravel) |
across the country | 2,600,000 mln m³ |
| Technological dolomite Dolomite Dolomite is a carbonate mineral composed of calcium magnesium carbonate CaMg2. The term is also used to describe the sedimentary carbonate rock dolostone.... |
west | 16,600,000 mln m³ |
| Technological limestone Limestone Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera.... |
north | 13,800,000 mln m³ |
| Decoration dolomite Dolomite Dolomite is a carbonate mineral composed of calcium magnesium carbonate CaMg2. The term is also used to describe the sedimentary carbonate rock dolostone.... |
west | 2,900,000 mln m³ |
| Construction dolomite Dolomite Dolomite is a carbonate mineral composed of calcium magnesium carbonate CaMg2. The term is also used to describe the sedimentary carbonate rock dolostone.... |
west | 32,900,000 mln m³ |
| Blue clay Clay Clay is a general term including many combinations of one or more clay minerals with traces of metal oxides and organic matter. Geologic clay deposits are mostly composed of phyllosilicate minerals containing variable amounts of water trapped in the mineral structure.- Formation :Clay minerals... |
across the country | 2,044,000 mln t |
| Granite Granite Granite is a common and widely occurring type of intrusive, felsic, igneous rock. Granite usually has a medium- to coarse-grained texture. Occasionally some individual crystals are larger than the groundmass, in which case the texture is known as porphyritic. A granitic rock with a porphyritic... |
across the country | 1,245,100,000 mln m³ |
| Peat Peat Peat is an accumulation of partially decayed vegetation matter or histosol. Peat forms in wetland bogs, moors, muskegs, pocosins, mires, and peat swamp forests. Peat is harvested as an important source of fuel in certain parts of the world... |
across the country | 230,300,000 mln t |
| Construction limestone Limestone Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera.... |
north | 110,300,000 mln m³ |
| Limestone cement Limestone Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera.... |
north | 9,400,000 mln m³ |
| Clay cement Clay Clay is a general term including many combinations of one or more clay minerals with traces of metal oxides and organic matter. Geologic clay deposits are mostly composed of phyllosilicate minerals containing variable amounts of water trapped in the mineral structure.- Formation :Clay minerals... |
north | 15,6000,000 mln m³ |
| Dictyonema flabelliforme Uranium Uranium is a silvery-white metallic chemical element in the actinide series of the periodic table, with atomic number 92. It is assigned the chemical symbol U. A uranium atom has 92 protons and 92 electrons, of which 6 are valence electrons... |
north | 64,000,000,000 mln t |
| Wood Wood Wood is a hard, fibrous tissue found in many trees. It has been used for hundreds of thousands of years for both fuel and as a construction material. It is an organic material, a natural composite of cellulose fibers embedded in a matrix of lignin which resists compression... |
across the country | 15,6000,000 mln m³ |
| Technological sand Sand Sand is a naturally occurring granular material composed of finely divided rock and mineral particles.The composition of sand is highly variable, depending on the local rock sources and conditions, but the most common constituent of sand in inland continental settings and non-tropical coastal... |
north | 3,300,000 mln m³ |
| Lake lime Lime (mineral) Lime is a general term for calcium-containing inorganic materials, in which carbonates, oxides and hydroxides predominate. Strictly speaking, lime is calcium oxide or calcium hydroxide. It is also the name for a single mineral of the CaO composition, occurring very rarely... |
north and south | 808,000 t |
| Phosphorite Phosphorite Phosphorite, phosphate rock or rock phosphate is a non-detrital sedimentary rock which contains high amounts of phosphate bearing minerals. The phosphate content of phosphorite is at least 15 to 20% which is a large enrichment over the typical sedimentary rock content of less than 0.2%... |
north | over 350,000,000 mln t (estimated) |
| Subsoil Subsoil Subsoil, or substrata, is the layer of soil under the topsoil on the surface of the ground. The subsoil may include substances such as clay and/or sand that has only been partially broken down by air, sunlight, water, wind etc., to produce true soil... |
across the country | 21,1 km³ |