Economic Factors In Estonia

Strong growth

Since regaining independence from Russia in 1992, the Estonian economy has seen it all: the relative inexperience of the country’s leaders in those early days were quickly forgotten, resulting in years of double digit GDP growth, peaking in 2006 with a high of 11,2%. The economy has performed very well over the last decade with the expected cooling off taking place in 2007, but still “clocking” an impressive 7,1%.

Estonia is widely seen as the growing economy of the Baltic States and ranks a very impressive 18 out of 178 in the “Ease of Doing Business” charts.

Increasing tourism

Estonia boasts an ever-growing tourism market and much potential for further growth in many sectors.

Tourism has long provided a large part of Estonia’s GDP: the medieval buildings in Tallinn’s “Old Town” have attracted scores of tourists and will continue to do so in the future. Tallinn has more than 120 quality hotels, the latest addition being an impressive 5-star international hotel belonging to the Swissotel chain located in downtown Tallinn, in a section known as “Wall Street”.

The town’s modern harbour, with no less than 4 passenger terminals, welcomes cruise ships from all over the world, with more than 300 cruise liners docking per year and delivering some 295.000 visitors to Estonia.

The fast ferry service offered by several operators every 30 minutes or so to Finland’s capital, Helsinki, and other major cities like Stockholm, St. Petersburg, Rostock and Kiel help to boost the number of visitors to Estonia to more than 1,5 million (2007).

Increased airport capacity

Tallinn’s international airport has recently been doubled in size to cope with the increasing numbers of visitors that enter Estonia by way of air. Located just 4 km from the city centre, it is a fast and convenient way to reach Estonia from major European hubs.

EU membership

Accession to the European Union in 2004 has added another dimension to the Estonian economy, with foreign direct investments ever increasing. It is expected that Estonia will join the Euro zone in 2011 which will make investing in Estonia even more interesting.

Neighbouring Russia

Close proximity to Russia, together with the fact that Russian is still widely spoken in Estonia, has made it a popular location for Russian investors - all the more so as Estonia has joined the Schengen zone, making it very easy for Russians owning property in Estonia to move throughout the European Union.

Capital appreciation

Recent years have shown appreciation of up to 100% p.a. in all real estate sectors. This kind of return is of course not sustainable for any length of time and the market has stabilised since early 2007, resulting in lower prices in all sectors. Current price levels are once more interesting for investors as bargaining on the price is now acceptable - a new phenomena for property sellers in Estonia who until now were accustomed to receiving the advertised price.

Investor-friendly systems

The economic policy is aimed at encouraging foreign investors and there are virtually no restrictions to property investment in Estonia. The flat tax system and no corporate taxes are all contributing factors to an investor-friendly environment.

A liberal economic policy and low taxes have already attracted numerous investors to this Baltic country that lies at the heart of the 90-million strong Baltic region.

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