OECD Economic Surveys: Estonia 2011

image of OECD Economic Surveys: Estonia 2011

The 2011 edition of OECD's periodic economic survey of Estonia's economy.  This edition includes chapters covering emerging from the recessions, fiscal policy, public sector spending efficiency, and making the most of globalisation. It finds that Estonia continues to show a remarkable determination in policy making.  It has established business-friendly regulation, avoided fiscal deterioration during the crisis and made it into the euro area despite being hit by an accumulation of external shocks.  Nevertheless, it has not fully reaped the benefits of globalisation.

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Estonia: Making the most of globalisation

Estonia has already experienced many benefits of increasing international integration, most obviously in significant convergence. From the Russian crisis in 1998 to the great recession in 2009 Estonia gained an impressive 20% relative to the EU27 average GDP per capita in PPPs. Similar to the other Baltic economies, however, a considerable part of earlier convergence gains was lost in the crisis, aggravated due to the collapse of world trade. While this was also true for Ireland, central European catching up countries like Czech Republic, Poland and Slovakia have been less affected by the crisis and could maintain most of their convergence gains. Nevertheless, prior to the recession Estonia’s gap in income and productivity levels compared with the EU average were still around 30% and as the country emerges from recession it faces major policy challenges to maintain its pre-crisis rate of growth potential. The greater focus on closing the productivity gap in manufacturing-for-exports of other transition countries may serve as an interesting benchmark in order to get more out of globalisation.

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