Estonian Economy - from Independence to Euro

If you are interested in Estonia for work, investment, or just as a tourist, it may help to read a quick summary of recent events in Estonian economy, so you don't get surprised by local prices when arriving in Tallinn.

Estonia adopted the Estonian kroon  in June 1992, replacing the Soviet ruble as national currency after it's re-independence on August 1991. During the transition to a free-market economy, inflation was high as the country economy had fast growing GDP rates (Eurostat dashboard).

Confidence in Estonian economy increased when Estonia joined the European Union and NATO in 2004, and entered the Schengen area in 2007, leading to a housing bubble that burst in 2007, aggravated by the 2008 global financial crisis.

High unemployment rates and a huge drop in GDP followed in 2007 and 2008, but with strict government austerity measures and a pledge to join the Eurozone (finally achieved in 2011), the country economy started rebounding in 2009 and is growing ever since (Real GDP per capita - Eurostat), although still with inflation among the highest in European Union.

To fight economical recession, the European Central Bank decided in July 2012 to cut the main interest rates from 1%  to 0.75% and in May 2013 to 0.5% per year (ECB interest rates), creating a huge incentive for private lending (specially for mortgages) in Estonia.

How these recent economical factors will affect Estonia is not yet known, but some visible trends are the growth of Estonian average wage and GDP per capita in contrast with population decline aggravated by Estonian emigration to other European countries (based on 2011 Census) and the concentration of almost one third of the population and more than half of GDP in the capital area (Harju county).

What do you think the future holds for Estonian economy? Did this post miss any important point? Let me know in the comments.


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