Analysis Of Estonian Economic System And Its Main Problems
Estonia, Latvia, and Lithuania are the three Baltic Countries. From a political as well as economic standpoint, there are three key dates that must be noted: i. August 20, 1991: Estonia gained independence from the Soviet Union. Estonia’s population is approximately 1. The population of Estonia is estimated at 1.
Estonia was hit hard by the global recession of 2008-2009. As a result, the real GDP in Estonia fell 15%. Recovery has been slow over the years. According to the European Commission’s expectations, the growth in real GDP was 4% for 2017. The growth is expected to be 3% in 2018 and 2019. In 2017, the inflation rate grew to 3.7%. The global rise in prices for goods like food and energy has caused the inflation rate to reach 7%. In 2018 and 2019, we expect a decrease of 3%.
We now analyze some of the most relevant aspects and features of the Estonian Economic System. The country shows a good education system that reflects well on the workforce. The unemployment rate has fallen by 10% since 2010. High employment rates are a major factor in the rise of private consumption and low inflation.
In addition, the country has seen a large increase in the wages of both public and private sector workers, as well as the minimum wage, because many potential skilled workers have chosen to leave the nation rather than remain. Estonia still has a gender pay difference of 26. This is because Estonia’s parental leave system allows parents (mostly women) to suspend work for 18 months after childbirth. The woman is then faced with more challenges to reintegrate into the work market.
Inequality of income is the biggest economic problem in Estonia. Gini coefficient estimates are at 0 for a country. The OECD has a value of 35, which is among the highest in the world. This situation comes from a variety of factors. For example, distribution after tax or (for older people) low pensions. This means that we can expect some groups to be worse off in the next few years. These include the elderly as well as the unemployed and families with more than three children. The State is taking steps to address this problem. A large portion of social spending goes to families. And, more importantly, a tax reform is planned to achieve a fairer distribution of income after taxes. Estonia has a stable financial system. Both private and corporate loans have seen a steady growth since 2012 at around 5%. Estonia has also seen an increase in investment from the local population while reducing foreign resident investments.
The European Commission confirms the health of Estonia’s banking sector. First, the ratio of non-performing loans has remained at a low level, around 2%. The highest capital adequacy rating in the EU was achieved by Estonia. Other important values like the average return on equity and return of assets are also at 11 and 1. The 5% is a higher percentage than the averages for the European Union. The country faced a moderate growth in credit, around 6%. This was mainly because the number of mortgages and loans to households decreased.
More credit restrictions are imposed on small and medium enterprises. Nevertheless, the government provides financial assistance to those entities, including start-ups that are most in need. The European Commission reports that, in the housing industry, prices have grown very slowly since 2016. And, supply has always been equal to demand. The growth of the loans to purchase houses is moderate and in line with the GDP.