Editing Economy of Estonia (section)

==History==
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===Early history===
Until the early 13th century, the territory that is now known as Estonia was independent. The economy was largely an agricultural one, but Estonia being a country with a long coastline, there were also many maritime activities. Autonomous development was brought to an end by the [[Northern Crusades]] undertaken by the King of Denmark, the German Livonian and the Teutonic military orders. The Estonian world was transformed by military conquest. The war against the invaders lasted from 1208 to 1227. The last Estonian county to fall was the island of Saaremaa in 1261.<ref>{{cite web |title=History of Estonia |publisher=Britannica|url=https://www.britannica.com/place/Estonia/History|access-date=29 January 2021}}</ref>

Thereafter, through many centuries until [[World War I|WWI]], Estonian agriculture consisted of native peasants working large feudal-type estates held by ethnic [[Baltic Germans|German]] [[landlord]]s.--> 
In the decades prior to [[World War I]] and independence, during the Czarist rule a rather large industrial sector developed in Estonia. For example, the [[Kreenholm Manufacturing Company]] was then the world's largest [[cotton mill]].

===Independence===
After declaring independence in 1918, the [[Estonian War of Independence]] and the subsequent signing of the [[Treaty of Tartu (Russian–Estonian)|Treaty of Tartu]] in 1920, the new Estonian state inherited a ruined post-war economy and an inflated ruble currency. Despite considerable hardship, dislocation, and unemployment, Estonia spent the first decade of independence entirely transforming its economy. In 1918, The Czarist ruble was replaced by the [[Estonian mark]], which was in circulation until 1927. By 1929, a stable currency, the [[Estonian kroon|kroon]], had been established. It was issued by the [[Bank of Estonia]], the country's [[central bank]]. Compensating the German landowners for their holdings, the government confiscated the estates and divided them into small farms, which subsequently formed the basis of Estonian prosperity. Trade focused on the local market and the West, particularly Germany and the United Kingdom. Only 3% of all commerce was with the USSR.

Historically, Estonia's economy was agricultural, modernising significantly [[Estonian War of Independence|post-independence from Russia in 1918]]. There was a notable knowledge sector in [[Tartu]] and expanding industrial sector, exemplified by the [[Kreenholm Manufacturing Company]]. [[Western Europe]]an markets were familiar with Estonian dairy, with the main trade partners being Germany and the UK; only 3% of commerce was with the neighbouring [[USSR]]. Estonia and [[Finland]] had a similar standard of living.<ref name="maddison185">{{Cite book |last=Maddison |first=Angus |title=The world economy |publisher=OECD Publishing |year=2006 |isbn=92-64-02261-9 |page=185}}</ref> USSR's annexation of Estonia in 1940 and destruction during World War II crippled the economy. Post-war [[Sovietization]] continued, with the integration of Estonia's economy into the USSR's [[Command economy|centrally-planned]] structure.

===Soviet occupation===
The USSR's forcible annexation of Estonia in 1940 and the ensuing [[Nazism|Nazi]] and [[Soviet Union|Soviet]] destruction during [[World War II]] crippled the Estonian economy. Post-war Soviet occupation and Sovietisation of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure. More than 56% of Estonian farms were [[collective|collectivised]] in the month of April 1949 alone after [[Soviet deportations from Estonia|mass deportations to Siberia]] the previous month. Moscow expanded on those Estonian industries which had locally available raw materials, such as [[oil shale]] mining and phosphorites.

===Restoration of independence, modernisation and liberalisation===
[[File:Tln1.jpg|thumb|[[Maakri]] has become the [[Central business district]] of Tallinn in the 21st century]]
[[File:GDP_per_capita_Baltics.svg|thumb|right|Real GDP per capita development of Estonia, Latvia and Lithuania]]
After Estonia [[Revolutions of 1989#Economic reforms|restored its independence in 1991]] and became a [[market economy]], it emerged as a pioneer in the global economy. Estonia styled itself as a bridge between East and West, adopting significant economic reforms and technological innovations.

In June 1992, Estonia replaced the [[Russian ruble|ruble]] with its own freely convertible currency, the [[Estonian kroon|kroon]]. A [[currency board]] was created and the new currency was pegged to the German Mark at the rate of 8 Estonian kroons per [[Deutsche Mark]]. When Germany introduced the [[euro]] the peg was changed to 15.6 kroons per euro.

In 1994, it became the first country in the world to adopt a [[flat tax]], with a rate of 26% regardless of personal income.<ref>{{cite journal | url=https://www.jstor.org/stable/27740067 | jstor=27740067 | title=The Spread of the Flat Tax in Eastern Europe: A Comparative Study | last1=Evans | first1=Anthony John | last2=Aligica | first2=Paul Dragos | journal=Eastern European Economics | date=16 March 2024 | volume=46 | issue=3 | pages=49–67 | doi=10.2753/EEE0012-8775460303 }}</ref> Between 2005 and 2008, this was reduced to 21% over several steps.<ref name="heritage">{{cite web |last=Laar |first=Mart |author-link=Mart Laar |title=The Estonian Economic Miracle |publisher=[[The Heritage Foundation]] |date=7 August 2007 |url=http://www.heritage.org/Research/WorldwideFreedom/bg2060.cfm |access-date=21 August 2012 |archive-date=3 March 2010 |archive-url=https://web.archive.org/web/20100303174230/http://www.heritage.org/Research/WorldwideFreedom/bg2060.cfm |url-status=unfit }}</ref>

In early 1992, both liquidity problems and structural weakness stemming from the communist era precipitated a banking crisis. As a result, effective bankruptcy legislation was enacted and privately owned; well-managed banks emerged as market leaders.<ref name="WorldBank1993">{{cite book |title=Estonia: The Transition to a Market Economy |publisher=World Bank |year=1993 |location=Washington, D.C. |isbn=978-0-8213-2351-9 |pages=45–50}}</ref> The fully electronic [[Tallinn Stock Exchange]] opened in early 1996, and was purchased by Finland's [[Helsinki Stock Exchange]] in 2001. Estonia joined the World Trade Organization in 1999.

From the early 2000s to the latter part of that decade, the economy experienced considerable growth. In 2000, Estonian GDP grew by 6.4%. After accession to the [[European Union]] in 2004, double-digit growth was soon observed. GDP grew by 8% in 2007 alone. Increases in labor costs, the imposition of tax on tobacco, alcohol, electricity, fuel, gas, and other external pressures (growing prices of oil and food on the global market) inflated prices in 2009.<ref name="IMF2011">{{cite book |title=Estonia: A Giant of the Baltics |publisher=International Monetary Fund |year=2011 |location=Washington, D.C. |isbn=978-1-61635-145-8 |pages=12–18}}</ref>

===2008 financial crisis, response and recovery===
[[File:Real GDP growth in Estonia, 2002-2012.png|thumb|300px|Real GDP growth in Estonia, 2002–2012.]]
The [[2008 financial crisis]] had a deep effect on the economy, primarily as a result of an investment and consumption slump, that followed the burst of the real estate market bubble that had been building up. In December 2008, Estonia became a donor country to the [[IMF]]-led rescue package for [[Latvia]]. In response to the crisis, the [[Andrus Ansip's second cabinet|Ansip government]] opted for fiscal consolidation and retrenchment by maintaining fiscal discipline and a balanced budget in combination with austerity packages: The government increased taxes, and reduced public spending by slashing expenditures and public salaries across the board.<ref name="Kattel_and_Raudla" />

After a long period of very high growth of GDP, the GDP of Estonia decreased. In the first quarter 2008, GDP grew only 0.1%, and then decreased: negative growth was −1.4% in the 2nd quarter, a little over −3% (on a year-to-year basis) in the 3rd quarter, and −9.4% in the 4th quarter of that year.<ref name="BBN_20090609">{{cite news |last=Tubalkain-Trell |first=Marge |title=Estonian Economy Fell 15.1 pct in Q1 |publisher=Baltic Business News |date=9 June 2009 |url=http://www.bbn.ee/?PublicationId=5e575e3c-7f5b-40c6-9a06-b3e53fb5d67b |access-date=21 August 2012 |archive-date=11 August 2014 |archive-url=https://web.archive.org/web/20140811214940/http://www.bbn.ee/?PublicationId=5e575e3c-7f5b-40c6-9a06-b3e53fb5d67b |url-status=dead }}</ref>

The government made a supplementary negative budget, which was passed by the [[Riigikogu]]. The revenue of the budget was decreased for 2008 by EEK 6.1 billion and the expenditure by EEK 3.2 billion.<ref>{{cite web |title=Government approves supplementary budget for 2008 |publisher=[[Ministry of Finance (Estonia)|Ministry of Finance of the Republic of Estonia]] |date=15 May 2008 |url=http://www.fin.ee/?id=80290 |access-date=21 August 2012}}</ref> A current account-deficit was extant, but began to shrink in late 2008. In 2009, the economy further contracted by 15% in the first quarter.<ref name="BBN_20090609" /> Low domestic and foreign demand depressed the economy's overall output.<ref name="reuters-2009-06-09">{{cite news |last=Mardiste |first=David |title=Estonian Economy Contracts Sharply in First Quarter |agency=[[Reuters]] |date=9 June 2009 |url= http://www.forexpros.com/news/forex-news/estonian-economy-contracts-sharply-in-first-quarter-61196 |access-date=21 August 2012}}</ref> The economy's 34% industrial production drop was the sharpest decrease in industrial production in the [[European Union]].<ref>{{cite news |last=Tubalkain-Trell |first=Marge |title=Estonian Industrial Production Fell Most in EU |publisher=Baltic Business News |date=12 June 2009 |url=http://www.bbn.ee/?PublicationId=3259772f-4391-4a3a-92d7-fa7eb18f6a02 |access-date=21 August 2012 |archive-date=11 August 2014 |archive-url=https://web.archive.org/web/20140811214951/http://www.bbn.ee/?PublicationId=3259772f-4391-4a3a-92d7-fa7eb18f6a02 |url-status=dead }}</ref> Estonia was one of the five worst-performing economies in the world in terms of annual growth,<ref>{{cite web |title=Country Comparison – National product real growth rate |work=The World Factbook |publisher=CIA |date=2009 |url=https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html?countryName=Estonia&countryCode=en&regionCode=eu&rank=209#en |access-date=26 April 2010 |archive-date=7 July 2014 |archive-url=https://web.archive.org/web/20140707082719/https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html?countryName=Estonia&countryCode=en&regionCode=eu&rank=209#en |url-status=dead }}</ref> and had one of the hightest rates of unemployment in the EU, which rose from 4% in May 2008 to 16% in May 2009.<ref>{{cite magazine |last=Zumbrun |first=Joshua |title=In Pictures: The World's Hardest-Hit Economies |magazine=[[Forbes]] |url= https://www.forbes.com/2009/07/08/economics-iceland-ireland-business-beltway-countries_slide_4.html |date=2009-07-08}}</ref>

In July 2009, the [[value-added tax]] was increased from 18% to 20%.<ref>{{cite news |last=Tubalkain-Trell |first=Marge |title=MPs approve plan to increase VAT rate to 20 pct |publisher=Baltic Business News |date=18 June 2009 |url= http://bbn.ee/?PublicationId=87f66124-06d2-4a65-bc7b-49ccc6d69dfc |access-date=21 August 2012}}</ref> The recorded budget deficit for 2009 was just 1.7% of GDP.<ref name="Kattel_and_Raudla">{{Citation |last1=Kattel |first1=Rainer |last2=Raudla |first2=Ringa |title=Why Did Estonia Choose Fiscal Retrenchment after the 2008 Crisis? |work=Journal of Public Policy |date=August 2011 |url= https://www.researchgate.net/publication/231828912 |access-date=2019-02-09}}</ref> The result was, that Estonia was one of only five EU countries in 2009 that met the Maastricht criteria for debt and deficit, and had the third-lowest deficit after Luxembourg and Sweden; Estonia did not ask for support from the [[International Monetary Fund|IMF]]. Despite the third-largest drop in GDP, the country had the lowest budget deficit and lowest public debt among Central and Eastern European countries. In 2009, the Estonian economy began to rebound, and economic growth resumed in the second half of 2010. The country's unemployment rate dropped significantly to pre-recession levels.<ref name="stat_unemployment">{{cite web |title=Töötuse määr |language=et |trans-title=Unemployment rate |publisher=Statistics Estonia |year=2019 |url=https://www.stat.ee/stat-tootuse-maar |access-date=2019-02-09 |archive-date=9 February 2019 |archive-url=https://web.archive.org/web/20190209182011/https://www.stat.ee/stat-tootuse-maar |url-status=dead }}</ref> To top it off, Estonia was granted permission in 2010 to join the eurozone in 2011.<ref name="Kattel_and_Raudla" />

===Joining the euro===
Before joining the eurozone, the [[Estonian kroon]] had been pegged to the euro at a rate of 15.64664 EEK to one euro; before then, the kroon was pegged to the German mark at approximately 8 EEK to 1 DEM.

The design of [[Estonian euro coins]] was finalized in late 2004.<ref name="Tere_euro">{{cite web |title=The Estonian euro coin |website=Tere Euro |publisher=[[Bank of Estonia]] |date=2011-07-11 |url=http://euro.eesti.ee/EU/Prod/Euroveeb/application/controllers/handleSessions8cc5.html?lang=en&oid=11258 |access-date=2019-02-09 |archive-date=24 February 2021 |archive-url=https://web.archive.org/web/20210224161646/http://euro.eesti.ee/EU/Prod/Euroveeb/application/controllers/handleSessions8cc5.html?lang=en&oid=11258 |url-status=dead }}</ref> Estonia's journey towards the euro took longer than originally projected, owing to the inflation rate continually being above the required 3% before 2010,<ref>{{cite web |title=Tarbijahinnaindeksi muutus |language=et |trans-title=Consumer-price index change |publisher=Statistics Estonia |year=2019 |url=https://www.stat.ee/stat-tarbijahinnaindeksi-muutus |access-date=2019-02-09 |archive-date=9 February 2019 |archive-url=https://web.archive.org/web/20190209124006/https://www.stat.ee/stat-tarbijahinnaindeksi-muutus |url-status=dead }}</ref> which prevented the country from fulfilling the entry criteria. The country originally planned to adopt the euro on 1 January 2007 and officially changed its target date twice: first to 1 January 2008, and later to 1 January 2011.<ref name="HS">{{cite news |title=Alcohol and tobacco tax to rise in Estonia next year |location=Finland |newspaper=[[Helsingin Sanomat]] |date=25 May 2007 |url= http://www.hs.fi/english/article/Alcohol+and+tobacco+tax+to+rise+in+Estonia+next+year/1135227499218 |access-date=1 January 2009}}</ref>

On 12 May 2010, the European Commission announced that Estonia had met all criteria to join the eurozone.<ref>{{cite news |title=Estonia ready for euro |url=http://ec.europa.eu/news/economy/100512_1_en.htm |publisher=[[European Commission]] |date=12 May 2010 |access-date=12 May 2010}}</ref> On 8 June 2010, EU finance ministers.<ref>[http://www.actionforex.com/analysis/daily-forex-fundamentals/estonia-to-join-euro-1-january-2011-20100608115064/ Estonia to Join Euro 1 January 2011] {{webarchive |url= https://web.archive.org/web/20100611052826/http://www.actionforex.com/analysis/daily-forex-fundamentals/estonia-to-join-euro-1-january-2011-20100608115064/ |date=11 June 2010}}</ref> In July 2010, Estonia received the final approval from ECOFIN to adopt the euro onwards from 1 January 2011; on that date Estonia became the 17th [[eurozone]] member state and circulated alongside the [[Estonian kroon|kroon]] until 14 January 2011.<ref name="reuters-2011-01-01">{{cite news |last=Mardiste |first=David |title=Estonia joins crisis-hit euro club |date=1 January 2011 |work=[[Reuters]] |url= https://www.reuters.com/article/idUSTRE6BU0S720110101 |access-date=21 August 2012}}</ref> With that, Estonia became one of the first post-Soviet states to join the [[eurozone]].<ref name="HS" />

In August 2011, [[Standard & Poor's]] raised Estonia's credit rating from A to {{nowrap begin}}AA-.{{nowrap end}} Among various factors, S&P cited as contributing to its decision was confidence in Estonia's ability to "sustain strong economic growth."<ref>{{cite news |last=Ummelas |first=Ott |title=Estonia's Rating Raised to AA- by S&P on Economic Growth, Strong Finances |publisher=[[Bloomberg L.P.|Bloomberg]] |date=9 August 2011 |url= https://www.bloomberg.com/news/2011-08-09/estonia-s-rating-raised-to-aa-by-s-p-on-growth-finances-1-.html |access-date=11 August 2011 |quote=Estonia's credit rating was raised by Standard & Poor's Ratings to the second-highest level in eastern Europe on the Baltic country's strong economic growth and solid public finances.}}</ref> Estonia's GDP growth rate in 2011 was above 8%, despite having negative population growth.<ref>{{cite web |title=Unemployment in Europe (monthly) |format=The chart shows data for the EU, Estonia, and Finland |agency=[[Eurostat]] |work=[[Google Public Data Explorer]] |url= https://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false&rdim=country_group&idim=country_group:eu:non-eu&idim=country:fi:ee&ifdim=country_group&tstart=948657600000&tend=1366747200000&hl=en&ind=false#!ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false&rdim=country_group&idim=country_group:eu:non-eu&idim=country:fi:ee&ifdim=country_group&tstart=948664800000&tend=1374613200000&hl=en_US&dl=en_US&ind=false |access-date=2014-01-24}}</ref><ref>{{cite web |title=GDP Growth Rate |agency=[[World Bank]] |work=Google Public Data |url= https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_kd_zg&scale_y=lin&ind_y=false&rdim=region&idim=country:EST&ifdim=region&tdim=true&tstart=895950000000&tend=1306180800000&ind=false |access-date=24 May 2013}}</ref>

The Estonian economy was hit by the [[COVID-19 recession]] before bouncing back with an 8.6% rise in GDP in 2021,<ref>{{cite web |title=Economic growth will slow |url=https://www.eestipank.ee/en/press/economic-growth-will-slow-01032022 |date=1 March 2022}}</ref> this was followed by the economic effect of the [[Russian invasion of Ukraine]] in February 2022 resulting in a fall in GDP of 1.3% in 2022 and high inflation which hit 24% <ref>{{cite web |title=Eurostat: Inflation in Estonia 24.2 percent in September |url=https://news.err.ee/1608734683/eurostat-inflation-in-estonia-24-2-percent-in-september |date=30 September 2022}}</ref> before falling to single digits in 2023.