While most economies in the European Union are slowing down, Estonia is going in the complete opposite direction. Estonia currently has the fastest economic growth rate in the European Union with a solid eight percent growth rate in the first quarter of 2011. Joining the European Union in 2004, Estonia has come a long way to establish itself as a prominent economic force in Europe. The country experienced some hindrances along the way but has overcome these obstacles while continuing to grow economically. There are many reasons and key business factors that account for this positive growth rate in Estonia.
Like most countries of the time, Estonia found itself in financial trouble after an initial increase of credit led to a construction boom and soaring house prices. However, the bubble was burst in 2008 leaving Estonia with many financial problems. Estonia enacted many policies to turn its difficulties around by liberalizing labor laws, increasing the retirement age, and cutting public spending. Despite these changes, taxes remained low in order to encourage business growth and foster the country’s entrepreneurial spirit.
Estonia is a small, young country gaining its independence just twenty years ago. Its society and culture are quick to respond to changes making the current business environment very positive for entrepreneurship. One of the biggest growth areas of Estonia’s economy is technology showing that many businesses in the country are quick to embrace technological development. The Estonian government’s business friendly agenda has also helped the start-up of new businesses. With an online tax reporting system, many businesses do not waste valuable time filling out tax forms or gathering information about regulations as this all can be done online. Generally speaking, the government of Estonia has made business start-up easier by limiting the common obstacles experienced by many new businesses.
Estonia is also becoming an attractive country for investors. Last January, Estonia joined the Eurozone stabilizing its currency. This currency stability, along with low corporate taxes which is zero on reinvested profits, has made Estonia a very attractive investment for businesses. Exports have also been on the rise and have increased 53 percent from last year. This year Estonia’s exports reached the one billion euro mark for the first time in its twenty year history.
It will be interesting to see if the growth of Estonia continues in the future. With Estonia in good economic shape, there is also much debate whether or not Estonia should help other countries that are struggling financially in the European Union. Whatever the case may be, it’s clear that Estonia’s future decisions will affect other countries as well as its own economic growth.