Competitive Estonian economy open to growth
The Estonian economy has proved its ability to succeed. Flexibility and openness are the characteristics and pervading principles of the Estonian economic policy. We are an e-country with a favourable business climate and cost advantages, and open to growth.
The location in a dynamic and fast-growing area at the Baltic Sea has given a strong impetus to the economic development here. The economic environment in Estonia is characterised
by competitiveness, and the indicators
of economic freedom have demonstrated
that the business climate is favourable here and a potential high return on investments. Estonia is undergoing an adjustment after high growth and it is important to bear in mind its long-term development perspectives.
The conservative budgetary policy plays a key role in the capacity for adjustments of the Estonian economy and has already brought us success in building up our economy.
In 2009 the state budget deficit will remain within the limits allowed by the Maastricht criteria, making it possible for Estonia to join the euro zone. The government has declared the readiness of Estonia to adopt the euro in January 2011 at the latest.
In coping with global setbacks, Estonia can rely on its reserves accumulated during the period of fast growth, which alleviate the impacts of the economic cycles. The foreign debt of the Estonian state/government is less than 5% of the gross domestic product (GDP), which leaves some room for manoeuvring during difficult times. Reserves could be accumulated thank to the rather thin public sector in the European context. The expenditures of the public sector are relatively low. The Estonian taxation system is simple and with few exceptions, the growth and investments of businesses are stimulated with the income tax exemption.
Joining the euro zone
is thelogical continuation of the successful monetary policy based on the currency board system. Particularly in the current global economic situation where the clear and specific prospects for the adoption of the euro provide assurance and increase the reliability of the business environment here. The European Commission and the European Central Bank will give their next regular assessment to the readiness of Estonia for the adoption of the euro
already at the beginning of 2010.
The flexibility which characterises our economy has an important role also in the labour market, making it possible to respond fast to signals from the market. The new Contract of Employment Act which will come into effect on 1 July 2009 will be an important factor accelerating the restructuring of the economy.
Regulation of the labour market together with unemployment insurance and retraining opoprtunities offer good opportunities for the development of the required incentives and the human capital. In addition, training of employees and recruiting of top specialists is supported in Estonia. Despite the fast salary increases in the recent years, the salary level in Estonia is low in comparison with the EU average and although the salary level will continue to rise together with the general economic development after going through the necessary adjustments, the Estonian economy has still strong cost advantages in this region.
Estonia is also a capable e-country. There are smart and innovative ideas here which have brought global success to several IT internationalized companies by inventing different technologies and products. A good example of communication between the state and a citizen or an entrepreneur in e-Estonia is the possibility for establishing a company in the internet in less than 5 minutes or filing the tax return in e-Tax Office in 10 minutes.
The recovery of the economic growth in Estonia is based on thorough structural changes.
The government regards it necessary to ensure further development of the business environment and to support structural adjustments of the economy and has created national programmes for the support of entrepreneurship and knowledge-based economy.
Estonia has selected entrepreneurship, research and development, tourism and internationalization as its strategic orientations.
Different business support measures implemented by Enterprise Estonia Foundation
in Estonia have been created by following the above-mentioned principles:
• Support of research and development projects, technological development centres
• Support of export marketing (export plan, business fairs in other countries)
• Training, consultation, diagnostics
• Support to the involvement of development specialists, top experts
• Support to the introduction of new technologies, investment support
• Innovation services (incl. innovation vouchers), cooperation in the field of innovation
• Research and technology parks and incubators
• Start-up support, start-up and microloan guarantees
• Support to the tourism sector
• Support to creative economy
• Favouring of financing activities; equity loan, loan guarantees, export guarantees, see www.kredex.ee