Ex-communist Europe
Estonia's newest good news
Bliss in the Baltic
Nov 17th 2011, 15:44 by V.D. | LONDON
YOU don’t have to be big to make it to the top. Or at least that is the case for Estonia, the fourth smallest euro zone member, with the best economic performance in the region. This is one of the main results of the Euro plus monitor, a policy brief published by the Lisbon Council, a Brussels-based think tank. The study looks at economic performance measured by a country’s overall economic health and the speed with which it is adjusting to the latest financial turmoil. Estonia’s performance tops both indices.
Part of the success is timing. Estonia's credit and construction bubbles burst well before the euro crisis came to full force, spurring a series of structural changes. Since the second half of 2007, Estonia has had the highest change in its net export balance, equivalent to 23.2% of its GDP. The respective change for the euro-zone is zero. Estonia’s ‘fiscal squeeze’ has also been impressive. In fact, financial stringency means the government in Tallinn could even relax its fiscal policy slightly.
Booming exports and fiscal conservatism have been vital in improving Estonia’s overall economic health. Yet a low debt ratio, only 6.7% of GDP (the lowest in the euro-zone), and a rapidly adjusting labour market have also played a key role, pushing the Baltic minnow ahead of all other euro zone members both in resilience and fiscal sustainability. Its entrepreneurial performance has been equally remarkable. In 2011 the number of new registered businesses in Estonia is expected to reach 14,000 in 2011, 43% more than in 2008.
While the labour market has adjusted significantly, the pre-crisis rise in labour costs is still harming the economy. The unemployment rate is one of the highest in the euro-zone, both among the overall workforce and young workers especially. Estonia ranks last in the labour cost index and among the bottom five in its capacity to integrate immigrants, two factors hampering competitiveness. For all that, topping the league is impressive for acountry that only 20 years ago emerged from half a century of foreign occupation. As Estonia continues catching up, product quality and the relative prices for domestic labour-intensive services are both expected to rise. Assuming competitiveness continues to rise, the Baltic tiger will top many more lists yet.
Eastern approaches deals with the economic, political, security and cultural aspects of the eastern half of the European continent. It incorporates the long-running "Europe.view" weekly column. The blog is named after the wartime memoirs of the British soldier Sir Fitzroy Maclean.
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These statistics mean nothing in the real world. You obviously didn't speak to working Estonians who have seen massive price rises in food and who are having to work more and more hours. Look at the news about Greece-massive increase in suicides.And Estonia is looking to create another homeless shelter as they have thousands sleeping rough in Tallinn in Baltic temperatures.
Ernst and Young tips Estonia as the fastest-growing Eurozone economy over the next five years, predicting an average 4.9 percent GDP growth for the 2011-2015 period
http://news.err.ee/economy/ca08b765-c876-4f7b-b1f1-299aa01a0ae9
Look! Greece is second best.
Lot's of digit's about nothing, Estonia is a country with pension around 200eurs, and salaries 300 eurs per month. And prices for cloth even higher than in UK etc. :))) Food price same as in Germany, people there just survive.
Sure, digits are ok :) But people are not.
Moachi, sorry, i do live in Estonia also, relying on my incomes and i am not complaining! We have done well in general, luckily. Proud, but still work to to. There is always room for improvement. These income figures you stated, are not very much of truth.. And every country has its poor who live on state aids etc.
Well, I can't complain about my income as well cos I work for international corporation(IT), but most of my buddies doesn't have nice income, unless they are estonians. Sure, every country has their poor but we have them too much, and they don't have any support at all, especially russians.
I support Moachi. I lived in Estonia for 20 years, now in Austria. Prises for food are almost the same, + - 10 cents, salary...
I'm a student and I work here on weekends as a loader. I earn 5 time more than in Estonia, when I worked as waiter in the summer in Tallinn.
Yes, Estonia made well in general, but after falling deeply down... that means to be as good as in 2006 or 2007 Estonia has to do a miracle, and don't forget how Estonia rely on grants from EU.
And I can honestly say, digits can also be a 140%, but difference between poor and rich people has tendency to go up.
Estonia may be doing relatively well compared to other Eurozone countries in certain ways (e.g. exports, savings, corruption) but this is not saying much. Life here is tough for the ordinary person and it hasn't been getting any easier. Though wages are rising they are still low by European standards and aren't keeping up with sky-rocketing prices.
I have visited Estonia on business. The Estonians are very proud of their Swedish/Germanic protestant traditions of hard work, frugality, honesty and solidity. All the more so after nearly 50 years of Russian communist occupation and over a century of Russian tsarist rule.
Estonia’s best economics performance in the region than other euro-zone countries are seems adequate macro-economic policies which provided opportunities to increase substantial economics activities to boost the growth rate with better entrepreneur skills in both government and private sectors as indicators mentioned.
Estonia follows the systems in which the role of government is substantial and important like socialist economy to keep control on every economic activities than free and private economic system as it was allied of soviet block in past, so the sentiment of economic policies and planning have had absorbed in blood of public to easily understand the government strategies that what is economic intention and its objectives to implement in the society?
Estonia’s government made equilibrium in the budget regarding expenditures and revenues to achieved development in public and private sectors by the induce-investment in infrastructure for industries and services- to improve the labor skills and healthier environment to acquire speedy growth.
Estonia tries to generate incomes efficient fiscal policies rather to increase debt to mortgage nation’s assets for long-term because minimum debt affected countries are considered as living and strong-guaranteed economy in future. These sorts of economics approach create lust to investors to invest in specified sectors without any fear that economy has potential to achieve growth.
Actually the main dream of any economy is to extent the growth rate or increase the supply to meet the demand and surplus to export abroad to earn foreign exchange to improve reserves in monetary aspects to increase supply of money and decrease interest rate to attract domestic and foreign investment.
Hence, we could assumed that if euro-zone countries follow and learn the Estonia’s economics policies to depend on fiscal reform measures instead of monetary policy to get income through debt would best way to disperse current crisis.
Erm, I must say I'm rather skeptical of a survey that shows Greece with the second-best economic performance and Germany with the second-worst. Am I missing something here?
MyopiaRocks is correct to be suspicious.
Estonia's GDP has not weathered the crisis well at all. Being able to beat the Eurozone growth in 2011 isn't so hard when you've already contracted far worse than anybody has. (Not counting other Baltic states) Even if it meets expected growth for 2011, it'll still have an economy that shrunk by 10% since 2008 began. That's a distaster for a state that had so much financial flexibility when the crisis started.
"economy that shrunk by 10% since 2008 began." Ha-ha-ha.
8, 5 % growth in Estonia in 2011!
8, 5 % !!!!
And in 2010 also growth 5% !
The Estonian economy shrunk 5% in 2008, and 14% in 2009.
In 2010 the economy grew 3%. The IMF predicts 6,5% growth for 2011. In this case the economy would still be down about 10% from its peak in 2007. Only in 2014 will the Estonian economy be as big as it was in 2007 (according to quite optimistic predictions for the years following 2011: the IMF predicts 4% growth in 2012, but The Economist only 2.2%).
Most newer predictions have 2011 growth at around 8% and even by the IMF's numbers, GDP at the end of 2011 would be down 7.5 precent compared to 2007.
But this is all ignoring the bigger picture. A very small, very open and trade dependent economy will always be prone to significant volatility in GDP growth. Yes, the economy contracted by a lot during the crisis. So much in fact that it seems utterly mindboggling to people used to seeing GDP figures of bigger, and by extension, more closed and diversified economies.
But all this followed 7 years of breakneck-growth. The bigger picture is that by the second quarter of 2011 (the latest for which accurate figures are available), real GDP had grown by 52% on a yoy basis, compared to 2000.
52% in 11 years! Even more in per capita terms since the population has decreased during that period. I'm not sure how many countries in the world have done better. China perhaps, but they started from a much lower base and it's hard to get any accurate assessment of actual GDP per capita.
What's more, this newest spurt of growth is based on a much more solid foundation than in the past. Both exports and overall industrial production are significantly higher than they've ever been and the previously huge current-account deficits have disappeared.
Um, 52% in 11 years is not that amazing. Its okay. A little less than 4% per year.
Generally speaking, barely pipping Greece and Ireland to the top of a chart would be considered a bad thing
Um... not that I'd ever question the all-holy truth of statistics, but look who's number two on that list.
Very healthy, indeed. Maybe Greece can teach the rest of Europe (sans Estonia) how to build a strong national economy?