The economy of Estonia remains in the mostly free category where it has been since 2001. The biggest obstacles to the country’s ascendance to the exclusive ranks of the free are its relatively low scores on the Index indicators for government spending and labor freedom. Reforms that address high levels of government spending and lingering rigidities in labor regulations would promote investment and improve productivity.
IMPACT OF COVID-19: As of December 1, 2020, 121 deaths had been attributed to the pandemic in Estonia, and the economy was forecast to contract by 5.2 percent for the year.
BACKGROUND
Estonia has been independent since 1991 and has become a stable multiparty democracy. It joined NATO and the European Union in 2004 and the Organisation for Economic Co-operation and Development in 2010. In 2010, it also became the first former Soviet state to adopt the euro. The center-right, pro-market Reform Party won the most seats in March 2019 elections but failed to form a coalition. Jüri Ratas, leader of the left-leaning Centre Party, remained prime minister, leading a coalition with the nationalist Conservative People’s Party of Estonia and the center-right Isamaa. The economy relies on robust electronics and telecommunications sectors and strong regional trade ties. Security concerns related to Chinese involvement led to the scrapping of a planned Baltic Sea tunnel.