After gaining membership to the European Union in 2004 the economy experienced a period of robust expansion. By 2006, economic growth had reached 11 per cent, however, this gave way to concerns over macroeconomic imbalances. Growth moderated in 2007 to around seven per cent. This slowdown continued in 2008 with a dramatic decline in GDP growth.
The global financial crisis and the related downturn in the domestic property market have been cited as one of the main reasons for the economy contracting by 3.6 per cent. The Economist Intelligence Unit expects an economic recovery to begin in 2011.
Economy
Estonia has the prestige of ranking among the most liberal economies in the world. In 2009, the country was placed at number 13 on the Heritage Foundation's Economic Freedom Index, although this represented a drop of one place on the previous year. The market-based economy is characterised by a balanced budget, the world's first flat rate income tax system, a fully convertible currency pegged to the euro, a competitive commercial banking sector and a favourable environment for foreign investment. Recent strong growth rates have given the people of Estonia a considerably higher standard of living than that of other new EU member states.
Investment Climate
Estonia's government maintains a highly favourable attitude towards foreign investment, treating companies the same – once a foreign-owned company is entered into the Estonian Commercial Register, it is treated equal to a company based on Estonian capital. The government has sought to maintain liberal policies in order to attract investments that could produce high value-added exports. Sound and liberal economic policies and excellent business climate have ensured a continuous growth of foreign direct investment (FDI) into Estonia. During the last 15 years Estonia has been one of the leading countries in Central and Eastern Europe in terms of inward investment per capita. Numerous foreign companies have found Estonia to be a highly attractive location. Companies partly or wholly-owned by foreigners account for one-third of Estonian GDP and over 50 per cent of the country's exports.
Opportunities
Estonia has a great affinity with the UK. The two countries had strong trading links before the Soviet occupation, and there is much potential for UK exporters in Estonia’s restored market economy.
Priority sectors identified by UK Trade &Investment are:
• Biotechnology
• Tourism, heritage and leisure
• Financial services – public-privatepartnerships
• EU funded business
• Education
Other sectors with potential opportunities for UK businesses include:
Electronics
Estonia has a well-educated and skilled workforce and is seeking to develop the following areas of activity:
• The assembly of PCB products and cables
• Office machinery assembly services for local and neighbouring markets
• Value-added logistics and customisation of electronics equipment
• R&D activities
A wide range of investment opportunities exist in the following industries:
• Food processing – dairy, meat, fish and bakery products, alcoholic and soft drinks, packaging
• Engineering – electrical machinery, tools, measuring equipment, ship repair
• Biotechnology – including DNA chips, transgenic animals, R&D in gene technologies
• Chemicals
• Textiles
ICT
The Estonian telecommunication sector is developing rapidly and new products and services are introduced constantly. Telecommunications infrastructures are fully liberalised, which has successfully promoted competition between different operators. Telephone charges in fixed and mobile networks are among the lowest in Europe. Recent notable developments in the telecoms market include the continued expansion of the fixed line sector, which has come as the result of the sale of triple play packages. In the mobile telephony market, the three wireless operators show that subscriber growth in the first nine months of 2008 was higher than the growth rate for the whole of the previous year.
Transport and logistics
Estonia's favourable geographical location, along with its well-developed infrastructure, offers good opportunities for all transport and logistics related activities. The ports of Tallinn, Pärnu and Kunda have easy navigation access, deep waters and good ice conditions. The Port of Tallinn is well-situated for cargo flows between Russia and Western Europe. It currently handles around 23 million tonnes of cargo and six million passengers. The deepwater port at Muuga just outside Tallinn is one of the most advanced in the region with good facilities for grain and perishables, ro-ro traffic and oil products and is Estonia's first free trade zone.
UK Trading Relationship
The UK is a major investor in Estonia, and UK exports are significant, reaching £214.42 million in 2008. Estonia makes very substantial exports to the UK, notably timber products and mineral oils. In 2008 the UK took goods worth £144.01 million from Estonia.
KEY FACTS
Official Name: Republic of Estonia
Capital: TallinnArea: 45,227sq km
Population: 1.3m (UN, 2008)
Major languages: Estonian, Russian
GDP (current): US$20.9bn (World Bank, 2007)
GDP growth: 6.3% (World Bank, 2007)
GNI per capita: US$12,830 (World Bank, 2007)
Inflation (consumer prices): 10.4% (2008 est.)
Labour force: 686,000 (2008 est.)
Unemployment: 6.2% (2008 est.)
Monetary unit: 1 kroon = 100 sents
Exports to UK: £144.01m (HMRC 2008)
Imports from UK: £214.42m (HMRC 2008)
Main Industries
Engineering, electronics, wood and wood products, textiles, IT, telecommunications.
Main Exports
Machinery and equipment, wood and paper, food products, textiles, chemical products.
Main Imports
Machinery and equipment, textiles, mineral fuels, chemical products, foodstuffs.
CONTACTS
UK Trade & Investment
Kingsgate House
66-74 Victoria Street
London SW1E 6SW
Tel: 020 7215 8510
Email: karen.hollidge@uktradeinvest.gov.uk
Web: www.uktradeinvest.gov.uk
British Embassy
Wismari 6
10136 Tallinn
Estonia
Tel: 00 372 667 4738
Email: infotallinn@fco.gov.uk
Web: www.ukinestonia.fco.gov.uk/en
Embassy of the Republic of Estonia
16 Hyde Park Gate
London SW7 5DG
Tel: 020 7589 3428
Email: london@mfa.ee
Web: www.estonia.gov.uk
