Estonia: country overview

05 June 2012
by Ina Dimireva -- last modified 05 June 2012

Estonia, a 2004 European Union entrant, has a modern market-based economy and one of the highest per capita income levels in Central Europe and the Baltic region. Estonia's successive governments have pursued a free market, pro-business economic agenda and have wavered little in their commitment to pro-market reforms.

Estonia flag

Year of EU entry: 2004

Member of Schengen area:Yes

Political system: Republic

Capital city: Tallinn

Total area: 45 000 km²

Population: 1.3 million

Currency: euro

Listen to the official EU language: Estonian

Estonia map

Country overview

Estonia, the most northerly of the Baltic states, regained its independence from the Soviet Union in 1991. It is a mainly flat country on the eastern shores of the Baltic Sea, with many lakes and islands. Much of the land is farmed or forested.

The Estonian language is closely related to Finnish, but bears no resemblance to the languages of the other Baltic republics, Latvia and Lithuania, or to Russian. About one quarter of the population is of Russian-speaking origin.

The capital, Tallinn, is one of the best-preserved mediaeval cities in Europe, and tourism accounts for 15% of Estonian GDP. The economy is driven by engineering, food products, metals, chemicals and wood products.

Economy overview

The current government has followed sound fiscal policies that have resulted in balanced budgets and low public debt. The economy benefits from strong electronics and telecommunications sectors and strong trade ties with Finland, Sweden, Russia, and Germany. Tallinn's priority has been to sustain high growth rates - on average 8% per year from 2003 to 2007. Estonia's economy fell sharply into recession in mid-2008, primarily as a result of an investment and consumption slump following the bursting of the real estate market bubble. Estonia has rebounded well from the economic crisis. GDP contracted 14.3% in 2009, but the Estonian economy now has the highest GDP growth rate in Europe, largely thanks to a boom in exports and increased foreign investment following Estonia's adoption of the euro on 1 January 2011. Although Estonian GDP returned to positive growth in 2010, unemployment continued to rise, reaching an all time high of 19.8% in early 2010.