Studii economice Coface


Population 1.3 million
GDP 27,962 US$
Country risk assessment
Business Climate
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major macro economic indicators

  2020 2021 2022 (e) 2023 (p)
GDP growth (%) -0.6 8.0 -0.2 0.1
Inflation (yearly average, %) -0.5 4.7 19.6 12.5
Budget balance (% GDP) -5.5 -2.4 -2.4 -3.8
Current account balance (% GDP) -1.0 -1.8 1.3 1.5
Public debt (% GDP) 18.5 17.6 19.5 19.5

(e): Estimate (f): Forecast  


  • Membership in the Eurozone (2011) and OECD (2010)
  • Close commercial, financial and cultural links with Scandinavia
  • Near self-sufficiency in energy thanks to oil shale
  • Development of high value-added sectors (electronics, IT services)
  • Flexibility of economic policy
  • Traditionally, external accounts in surplus and low indebtedness
  • Digitization of administrative procedures


  • Small open economy sensitive to external shocks
  • Declining labour force and shortage of skilled labour Lack of land links with the rest of the EU
  • Income inequalities and persistent poverty, especially in the predominantly Russian-speaking eastern regions
  • Need for stronger anti-money laundering measures highlighted by the IMF

Risk assessment

Slowdown in 2022 after a year of strong growth 

After experiencing one of the fastest growth rates in the EU in 2021, the Estonian economy will slow in 2022, while maintaining a strong pace. Household consumption (49% of GDP in 2020) benefited from the easing of health measures and grew in 2021. It is expected to remain the main driver of growth in 2022, due to savings accumulated during the pandemic and changes to the pension system that allow savings to be withdrawn at any time from September 2021 onwards. Although the labour market is expected to improve in 2022, the high unemployment rate – 6.9% in 2021 – could be a drag on consumption, which is also constrained by high prices for energy and food (12.5% and 29% of the consumption basket, respectively). Electricity prices, which were up about 75% year-on-year in September 2021, have pushed inflation to a record 6.6% and are expected to keep it high in 2022. However, the government has reduced the fees payable by energy suppliers and is assisting low-income households until March 2022. In addition, growth will be driven by increased public spending as part of the 2022-2025 budget strategy to combat the impact of the pandemic in the medium-term. Public investments, such as those earmarked to upgrade and expand rail infrastructure, will benefit from EUR 969 million in grants (about 3.3% of GDP) under the NextGenerationEU stimulus package and the Recovery and Resilience Facility. To meet demand, companies will need to invest to increase their capacity, mainly in the manufacturing sector (13% of GDP). Growth in fixed investment (19% of GDP in 2021) has been driven by Volkswagen's continued investment in its new subsidiary Car.Software Estonia AS (computer software development services and intellectual property products). Although tourism has only partially recovered due to continuing health restrictions, services (transport, logistics, biotechnology and financial services), which account for about 62.5% of Estonia's GDP and employ about 68% of the workforce, are also set to attract investment. Strong external demand for telephones, petroleum products, wood, components for construction, and measurement equipment should boost exports (71% of GDP in 2021). Trade in services will be particularly brisk thanks to the ICT sector (nearly 10% of GDP).


Low deficits and a small debt burden


The public deficit is expected to shrink further in 2022, remaining below the European target of 3%. However, the government plans to increase current spending (wages and pensions) and capital spending (80% of the National Recovery and Resilience Plan), thereby increasing the public debt, which will nevertheless remain well below the European average.


The current account deficit is expected to continue to widen. Imports related to business and government investment will fuel the trade deficit. The balance of trade in services was exceptionally negative in 2021, due to imports by Volkswagen as part of its investment. Despite being constrained by a mixed recovery in tourism, the balance is expected to return to surplus in 2022 thanks to continued support from transport and logistics, with increased exports in telecommunications and IT. Dividend repatriation by foreign investors will maintain the primary income account deficit. The current account deficit will be financed by structural funds and EU grants, as well as by substantial foreign direct investment (10% of GDP in 2020), although this is partially offset by portfolio investment abroad by Estonian pension funds and insurance companies. External debt, which amounted to about 89% of GDP in 2020, is mainly owed by the private sector and is more than offset by residents' assets held abroad.


Government instability linked to coalition changes 

A corruption scandal involving his party forced centrist Prime Minister Jüri Ratas and his three-party coalition government formed in 2019 (Centre Party, the conservative Pro Patria/Isamaa Party, and the far-right nationalists of the Conservative People's Party, EKRE) to resign in January 2021. A new coalition government, consisting of the same centrist party and the liberal, centre-right Reform Party of new Prime Minister Kaja Kallas, took office the same month. The new government has expressed its desire to restore the country's image (which has been damaged by EKRE's anti-European, anti-U.S., xenophobic and homophobic outbursts) and to fight money laundering from Eastern Europe. Alar Karis, the only candidate put forward by the bipartisan coalition, was elected to the presidency, a ceremonial position, in August 2021 by the parliament. He was supported by Isamaa and the Social Democratic Party (SDE), with EKRE choosing to abstain.


Divisions between the Estonian majority and the Russian minority remain a source of internal and external political tensions. These overlap in part with other tensions between the cities that are benefiting from digitalisation and rural areas that feel left behind.


Last updated: February 2022

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