Estonian Economy survived two different political systems with an annual GDP growth of 7.6 percent. Estonian Economy has miraculously survived all political struggle and evolved as a developing country.
Economic reforms in Estonia were similar to that of Central and Eastern European states. These states were also known as "transition economies”. Though some part of Estonia underwent huge economic reforms whereas there were some part were situation was worse. Economic reforms in Estonia began as early as in 1991-1992. Primary real reform in Estonian economy was monetary reforms, which began in the year 1992 by introducing their own national currency. The three main objectives of economic reforms were eradicating inflation and its effects, establishing equilibrium exchange rate based on supply and demand and winning the global cash crisis.
The second step of reform was establishing macroeconomic stabilization in the economy. Stabilization was achieved by implementing reforms from the top level to lower level. The second step intended to give new expectation, new predictions, and new opportunities to the people of the country. In order to ascertain radical economic reforms regulations of laws are necessary. According to several economists a free-market economy could lead to magical growth of wealth but it was not possible in real terms. Hence, regulation of law was necessary to achieve positive economic changes.
One of the major economic transitions in Estonia was establishment of private ownership as without private ownership markets don’t prosper. Another way to achieve a secure market is free economy accompanied with well-built property rights, reimbursement of property to original owners and privatization of existing public owned enterprises. Property reform and privatization both are essential for the developing the economy as both these is precondition for a market to function well.
Vital Statistics of Estonian Economy
GDP (PPP) ranking 56th (2007) GDP (PPP) $29.35bn (2007 est.) GDP growth 7.1% (2007) GDP per capita $21,800 (2007 est.) Inflation 6.6% (2007)
The radical reforms of Estonian economy have changed this state from its communist days. Estonian economy has experienced the fastest economic growth in Europe during the recent years. Economic growth rose from 11 percent to 12 percent. Estonia has developed so much in the recent years that the economy is reached the average European living standard, which is beyond expectation. There has been a considerable decrease in poverty and inequality. United Nations Human Development Index says that Estonia has changed its position from not-so-developed countries group to the group of developed countries.