General

Before the last economic crisis, the Estonian economy was growing very quickly. But as in many other countries, after the economic crisis of 2008-2009, the Estonian economy fell to its 2005 level. The preceding growth had been impressive and the same can be said about the decline.

The average Estonian resident's income is now about 55% of the European average. This gap was quickly decreasing, but it increased again because of the crisis. Although the extremely vigorous period of economic reforms is now over, the changes that Estonia is presently going through are far more extensive than those in the developed countries. The privatisation has been completed and the rules governing the economy resemble those of the Western Europe.

The Estonian economy is diverse – industry and transport, as well as commerce and different branches of services are all equally important. Due to the available natural resources Estonian economy largely relies on the branches related to the forest; Estonian energy sector is based on oil shale, a resource quite rare elsewhere in the world. Finland and Sweden are the most important trade partners, but the role of other European counties and countries of the world has increased over the years as well. The Estonian economy profits significantly from the business generated by more than 4 million tourists a year, most of whom come from Finland.

Economic reforms and swift changes brought about an increase in unemployment in the 1990s, although a great number of people left Estonia during the first years of independence (in the period between the population polls of 1989 and 2000 the population of Estonia decreased by at least 194 thousand people, which is about 12%). During the fast growth of the economy, unemployment fell to 4% and salaries grew very quickly. During the crisis, salaries were cut and, because of layoffs, unemployment reached 19% by the beginning of 2010. Since then, the situation has slowly started to improve.

In general, Estonian governments have been pursuing a balanced policy thanks to which the state budget has been more or less balanced or in surplus. Reserves that had accumulated from budget surpluses enabled the Estonian government to avoid borrowing during the crisis. Because of that, the Estonian burden of debt was among the lowest in Europe – only 7.2% of GDP. During the recession of 2009, the government was forced to increase taxes and cut spending to decrease the deficit, leading to a deficit that was very modest compared to the rest of Europe, just 1.7% of GDP.

Beginning in June 1992, the kroon was the currency in Estonia, with an exchange rate fixed to the German mark (1 mark = 8 kroons). After the creation of the euro, the kroon was tied to the euro (with an exchange rate of 1 euro = 15.6466 kroons). In 2011, Estonia joined the euro zone and the euro became the local currency.

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