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ESTONIA
Economy

Cities in ESTONIA

Tallinn

Economy

General

The reform process has put Estonia in a dire economic situation since independence. The legacy of the Soviet dictatorship with its centrally planned industrialisation policy has saddled the country with unbalanced industrial structures and underperforming businesses. Add to that fuel shortages, and a shortage of raw materials for industry, and it is clear that Estonia had a very difficult time in the first years after independence.

Yet the transformation from a command economy (by the Soviet Union) to a free market economy happened quickly. It began with the establishment of a central bank and the admission of commercial banks. Three years after independence, 50% of the gross national product (GNP) was generated by the private sector. After initial losses, in 1994 GNP grew by 3.5 to 5% for the first time in years. Estonia signed an association agreement with the European Union in 1995, holding out the prospect of accession to the EU.

A major problem for Estonia is environmental pollution. During Soviet rule, the Soviet army dumped hundreds of thousands of tonnes of oil on Estonian territory. A lot of toxic material has also ended up in the soil and (ground) water. In 2004, Estonia joined the EU. The economy has now become a completely free market economy and one of the strongest in Central Europe. In 2011 Estonia adopted the euro as its currency. That year the economy grew by almost 10%, but in 2013 the credit crisis reduced this to a growth of 1.5%. Currently (2017) growth has picked up again to just under 5%.

Agriculture, animal husbandry

Around 40 000 Estonians work in the agricultural sector. For the Estonians, who call themselves 'maarahvas', people of the land, this is a small number, considering their past as a rural agricultural economy. The 1930s were heyday for Estonian farmers in this regard.

During the Soviet occupation, farms were nationalised and collectivised. In 1949, out of 140 000 farms, only 2400 were state farms. After independence the farms were privatised again. With that, a major disadvantage, the inefficiency of the working methods, came to light again. This is mainly due to the fragmentation of the land. Investing in modern but expensive agricultural methods and machines is also a big problem. As a result, agricultural production steadily declined in the 1990s. A quarter of the rural population became unemployed. In 2017, agriculture contributes 2.8% to GNP.

The main crops are barley, other cereals, potatoes and vegetables. There are very many livestock farms and meat, milk, eggs and butter are important products. The food industry is self-sufficient. The fishing industry has the potential to become an important sector. Estonia has 230 ships, 90 of which fish in international waters. A large part of Estonia's food industry consists of fish and fish products.

Industry

Estonia has well-educated, technically skilled workers who are paid low wages by Western European standards. This makes it very interesting for foreign companies to invest in Estonia's economy. Companies from Finland, Sweden and the United States in particular invest a lot in the wood industry, the textile industry and processing industries. Americans and Finns invest especially in the computer industry, electronics and the car industry. Estonia has 40% of its forests (1.8 million ha). The exploitation provides wood for the furniture industry, for paper manufacturing and is an important fuel. The wood industry contributes 12% to the GNP and is one of the industries with the best prospects. The machinery and electronics industry is flourishing due to heavy foreign investment. The textile industry exports mainly to the United States and European countries.

Estonia has large phosphorus reserves which are used, among other things, in the production of fertilisers. The chemical industry also produces plastics, paints and lacquers.

Trade

In a short time Estonia has become an export country par excellence. Estonia exports mainly to Finland, Sweden, Russia, Latvia and Germany. In 2017, exports amounted to about $13.4 billion. Exported were food products, textiles, wood and charcoal. Imported were mechanical engineering products, foodstuffs, mineral products and textiles, mainly from Finland, Russia, Sweden and Germany. In 2017, imports amounted to about $14.4 billion. Trade with the Russians fell dramatically after independence, from 70% to 15%. Only in recent years have things started to improve in this regard.

Traffic

Estonia has a good infrastructure with good and sufficient roads and railways. The paved road network counts 14,800 km. A major motorway, the "Via Baltika", runs through the three Baltic States. The railway network has 1026 km, of which 132 km are electrified, connecting all major cities and industrial areas.

Estonia's ports are vital to the country's transport system. The seaports of Tallinn and New Tallinn (20 km to the east) only handle 5% of their own products. The largest inland port is Tartu. In 1991, 10 million tonnes of goods were shipped there.

There are six airports and runways on the three islands. For international traffic, there is the airport in the capital Tallinn. Since 1992 Estonia has had a national airline, Estonian Air.

Sources

Estonia, Latvia, and Lithuania: country studies
Federal Research Division, Library of Congres

Spilling, M. / Estonia
Marshall Cavendish Corporation

Taylor, N. / Estonia
Bradt Publications

Williams, N. / Estonia, Latvia & Lithuania
Lonely Planet

CIA - World Factbook

BBC - Country Profiles

Last updated December 2022
Copyright: Team The World of Info