Video - OECD Economic Surveys: Estonia 2026

The Estonian economy is recovering from a recession. While conditions are improving, uncertainty remains high and risks are tilted to the downside. The fiscal deficit is widening, reflecting higher defence spending and tax cuts. Although the government debt-to-GDP remains low, it has increased in recent years. Rising spending pressures will require steady consolidation staring in 2027, underpinned by more efficient spending and a tax reform. Social spending has increased, while population ageing and rising demand for public goods will put further pressure on pension spending, long-term care and healthcare. Mobilising additional revenues in a fair and growth-friendly way will require broadening the tax base and shifting part of the tax burden from labour towards other sources, including corporate and property taxation. Despite progress, the Estonian economy remains carbon intensive. Emissions reductions should accelerate, particularly in transport and forestry, alongside further strengthening of energy infrastructure capacity and resilience. Climate risks, while moderate, are increasing, calling for stronger investment and governance. As a leader in digital governance, Estonia is well placed to benefit from AI. Adoption in traditional sectors needs strengthening, while skills shortages holding back broader diffusion need to be addressed.