Having left the Soviet Union in 1991, Estonia joined the EU in 2004 and has never looked back. Tourists, enticed by no-frills carriers, throng the slick modern airport of the capital city Tallinn, while a thriving exchange of goods and peoples has grown out of the country’s historic and linguistic link with the Finns, a situation not enjoyed by neighbours Lithuania and Latvia.

Estonia is largely wifi-enabled and has a reputation for innovation in biotechnology and IT – it nurtured the individuals who wrote the software for Swede Niklas Zennström’s VOIP service Skype.

Yet although Estonia is predicted to enjoy 11% GDP growth this year, inflation is now a slight 4.7%, which is causing many observers to wonder if the economy is overheating.

Around half of the headline economic growth figure is fuelled by real estate prices, which rocketed 50% last year. This in turn has dramatically increased personal debt as individuals have scrambled to obtain mortgages, simultaneously leveraging real estate assets to buy imported consumer durables.

But the overall outlook remains strong as almost 80% of the economy is defined by services. Government and industry are working together to insure that their knowledge-based economy continues to grow.

Vital Statistics:
Population 1.4 million
GDP €9.96 bn
Per Capita GDP AT PPP €7,140
Expected GDP growth 2007 11%
Anticipated end-year inflation 2006 4.5%
Investor information www.investinestonia.com
Estimated number of days to open a business 21
Transparency International Corruption Perceptions Index position (out of 163: 1 = least corrupt) 24

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Upcoming features include Latvia, Lithuania, Slovakia and Hungary.


And you? What are your Eastern European hotspots for the coming year?