Estonia continues to show a remarkable determination in policy making. It has established a business friendly regulation, avoided fiscal deterioration during the crisis and made it into the euro area, despite being hit by an accumulation of negative external shocks. Helped by strengthening foreign demand and increased competitiveness the Estonian economy is recovering from a deep recession, which drove the unemployment rate up to nearly 20% and left an overhang of private-sector debt. The main policy challenges are now to: avoid cyclical unemployment becoming structural; strengthen the fiscal framework; improve the framework of bankruptcy procedures to deal with non-performing loans; reap efficiency gains in government operations; and make more out of globalisation as a sustainable driver of growth.