2019 OECD Economic Surveys: Estonia 2019

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Estonia’s economy continues to perform well, and growing incomes support well-being. However, the expansion has peaked, and growth is set to soften due to weak international demand. Prudent fiscal policy has resulted in low debt, but spending pressures related to meeting infrastructure needs and ageing are mounting. Old age poverty is high and the proposal to allow early withdrawal of pension funds threatens macroeconomic stability and pension adequacy. The gender wage gap is among the highest in the OECD, and inequalities in income and health are considerable, reflecting gaps in the social safety net. The oil-shale sector is highly energy-intensive and is the main culprit behind Estonia’s high greenhouse gas emissions, but reducing dependence on the sector is challenging, as it is an important employer and meets 70% of Estonia’s energy needs. Estonia is a frontrunner in digitalising government services and boasts a number of native ICT unicorns, but Estonian companies lag behind in utilising the productivity potential from adopting digital technologies.

This Economic Survey of Estonia assesses the country’s macroeconomic performance and proposes policy measures to promote higher and more inclusive growth. Policy recommendations relate to how to achieve Estonia’s nine development targets and how to embrace digitalisation by industries.




Key Policy Insights

Estonia’s economic growth performance has been a success story following its independence. It continues to be robust, albeit slowing somewhat. The benefits of growth, however, need to be more equitably distributed across regions, genders, people with different education levels and urban and rural areas. Inequalities in income, health outcomes and other areas are large in those dimensions. Channelling funds for infrastructure, social protection, health and care-taking would help improve wellbeing of all, while also lifting the growth potential. This chapter provides an overview of growth and wellbeing issues Estonia faces in the short- to medium term.


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