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CONSULTING

ESTONIA

Area: 45,227 sq km
Capital: Tallinn (pop. 402,500)
Population: 1.34 million
Annual growth rate: -0.632% (2008 est.)
Languages: Estonian (the official language), Russian, English and Finnish
Literacy: 99.8%
Religion(s): mainly Lutheran; Orthodox Christian
Government type: Parliamentary Republic
Neighbouring countries: Russia, Latvia
Memberships: UN, OSCE, NATO, EU, COE, EAPC, WTO, CBSS
Currency: Eesti Kroon (EEK); 1 kroon = 100 cents, Pegged to euro at rate 1 EUR = 15.6466 EEK; 11.4 kroon (EEK)=U.S.$1.

TARGET SECTORS

Manufacturing
• Machine building and automotive supplies
• Electronics & Plastic components
• Wood Processing (pulp and paper, particle boards for construction and furniture
Services & Logistics
• Shared service centres
• Tourism
• Education
• Financial Services
• Industrial real estate
• Construction
• Ports and Transport
Innovative Products
• ICT
• Biotechnology
• Material technologies

ECONOMY

GDP: EUR 11,380/$21.3 billion (2007)
Annual growth rate: 7.1% (2007), 0.4% (Q1 2008)
GDP (PPP): $28.69 billion (2007 est.)
GDP per capita (PPP): $15,868 (2007)
GDP - composition by sector: Agriculture 3%, Industry 21%, Services 60% (2007), Public sector 16%
Major Industries: Timber, food processing, machine production, engineering, electronics, textiles
Inflation: 11.4% (April 2008)
Unemployment: 4.2% (Q1 2008)
Labor force - by occupation: 687,000 (2007 est.): agriculture: 11%, industry: 20%, services: 69% (1999 est.)
Trade: Exports (2007): EUR 8 billion, $ 11 billion
Imports (2007): EUR 11.3 billion, $15.5 billion
FDI into Estonia: EUR 11. 761.7 billion (Jun, 2008)
FDI abroad: EUR 4.375.0 billion (Jun, 2008)

After enjoying double digit growth in recent years, 2007 GDP growth slowed to 7.1% and is expected to be around 2% for 2008 (Bank of Estonia estimate from April 2008). Prices are decreasing in the real estate sector, and there are signs of a slowdown in private consumption growth. Rising prices of non-domestic goods, especially food, both from the EU and imported from third countries, have pushed inflation to 6.6%.
According to the base scenario of Eesti Pank’s 2008 autumn forecast, Estonia’s gross domestic product will decline by 1.8% in 2008 and by 2.1% in 2009. So far the economic correction has been more abrupt than expected primarily due to decreasing domestic demand. In addition to the cessation of the rapid real estate market expansion, also private consumption dropped in spring more than forecasted. This has been induced by increasing uncertainty, higher interest rates, and declining borrowing. At the same time, in the past year and a half, external development factors have become less favorable from the point of view of Estonia’s future development. This has been conditioned by the weakening demand in export markets, the rise in the price of commodities, and growing global money market interest rates due to the financial crisis.
The economy should pick up again either at the end of 2009 or at the beginning of 2010. The average economic growth rate of 2010 will be 3%. Private consumption growth should recover in 2010 along with the revival of household confidence, whereas 2009 will be characterized by slowing wage growth and increasing unemployment.
October 22, 2008

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