Estonia 

Estonia country policy

Policy established 07 June 2010

• ILC, bank guarantee or central public guarantee (conditional)
• The country ceiling is 1500 mln euro
• Early warning signal 350 mln euro
• - of which was used as at 2012-02-29 0 mln euro

Country class: 4

Estonia country facts

Atradius Dutch State Business Economic Research
Country Report last updated :  22 April 2010 
Country :  ESTONIA 

Political Situation
Stable

Head of state
President Toomas Hendrik Ilves.

Form of government
Centre-right minority coalition of the Reform Party and Pro Patria-Res Publica Union (IRL), PM Andrus Ansip. Next parliamentary elections scheduled in 2011.

Internal Economic Situation
Small Recovery In 2010

General situation
After steep recession (-14,5%) in 2009 no recovery in 2010 (-1.1% in 2010). All components demand negative contribution (esp. priv. consumption) except NFB. Met budget Maastricht criteria for accession Euro also during the crisis at the expense of strict measures (less capital expenditure, higher VAT, lower public wages). In 2009 little deflation, in 2010 little inflation (not demand driven). Also poor performing Estonian export markets. Total public debt is very low (8% GDP); government has fiscal reserves of 9% GDP, but also borrowed from EIB (EUR 150 mln loan in 2009). Survival currency board until EMU entrance (2012-2013?) partly dependent on Latvia. If peg LVL EUR unsustainable, rush to convert savings to EUR. Pace of domestic credit growth slowed sharply after 2008: difficulties in obtaining credit and internal devaluation are hampering real economy. Well capitalised (21% in 2009), growing portfolio NPL (>6% in 2009). In 2009-2010 losses because of recession and weakened property market. 85% of loans denominated in EUR. Increased provisions for bad debt. Devaluation EKK less likely since the economical situation is getting better. Balance of payments positive for the upcoming years.

External Economic Situation  : Poor Solvency, Recovered Ca On Bop

Main sources of foreign exchange
Telecom/electronic equipment, timber and paper, textiles and clothes, food and chemical products. High share of re-exports (30%).

Main foreign markets
EU (78%, of which Finland 26%, Sweden 13%, Latvia 9%), Russia (9%).

Main expenses of foreign exchange
Machinery and electric appliances (>25%), communication equipment, chemical products, food, oil.
 
Balance of payments 
2009-2010 CA surplus because of severe recession in 2009 (imports decrease faster than exports). Nevertheless gross financing requirement of USD 8 bn in 2010-2011 (mainly ST debt falling due): capital inflows necessary. Dependence on FDI and support from Nordic Banks.
External economic situation
Estonia will be able to maintain the currency board until euro-entry (2012-13) unless Latvia is forced to devalue. external finance gaps to be covered mainly by roll-overs by Nordic banks. CA turns in small deficit (1,3%) in 2011.