ESTONIA: Useful Info

Estonia has been struggling to assert its identity as a separate nation since 1918, when it first declared its independence from the Russian empire. Trapped between Hitler and Stalin, it was conquered by Soviet troops and reabsorbed by the USSR. It won its battle for freedom in the 1990’s, though it is still working through boundary issues with Russia.

Despite a rocky political past and its fledgling independence, Estonia and the other Baltic states of Latvia and Lithuania have made great strides towards full market economies. Inflation is low, and forecasts are positive. The huge growth potential has in fact made it a key area for export and investment, which many firms in the UK have already benefited from. In 2004, Estonia imported £105.1 million worth of goods from the UK. The two countries also enjoy excellent political relations.

Estonia’s march towards progress has not left behind its unique traditions, including folk songs and verses, which it preserved after several centuries of occupation by more dominant countries.

Quick Facts

Population: 1.3 million (UN, 2005)
Capital: Tallinn
Area: 45,227 sq km (17,462 sq km)
Major languages: Estonian, Russian
Monetary unit: 1 kroon = 100 sents
Main exports: Machinery, textiles, wood products
GNI per capita: US $7,010 (World Bank, 2005)

Economic Background

With limited natural resources and a small population of just 1.4 million people, Estonia has built its efforts to bring in investors around the benefits of its location: as a crossroads to the East and West.

Estonia is an excellent entry point to the markets in Russia and other former members of the Soviet Union, not only because of geographic proximity but a cultural affinity. It also has modern transportation and communication infrastructure, and can boast of having the highest ratio of Internet hosts per population ratio—exceeding even its EU neighbors.

Estonia also has a very liberal foreign trade policy, with very little tarrif and non tarrif barriers. Its currency is fully convertible at a fixed exchange rate, has a flat-rate income tax. The government also takes conservative fiscal and monetary policies, including a constitutionally mandated balanced budget, creating a stable economic environment ideal for long-term investment.

Estonia has a particularly excellent environment for the banking industry. This began in 1992, when a banking crisis triggered bankruptcy legislation that favored privately owned, well managed banks. Today, foreigners are allowed to buy bank shares and even acquire majority holdings.

With these efforts, the Estonian economy has shown a healthy growth that is encouraging for investors. Average growth is 6%; average inflation is 4%. Estonia has also joined the World Trade Organisation and the European Union, and signed the EU Accession Treaty in April 2003.

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