Economy
GDP (2006): $13.3 billion.
Real GDP growth rate (2006 est.): 9.8%.
Per capita GDP (2006): $9,936.
Inflation (2006): 4.4%.
Unemployment (2006): 4.5%.
Natural resources: Oil shale, phosphorus, limestone, blue clay.
Agriculture (3% of 2006 GDP): Products--livestock production (milk, meat, eggs) and crop production (cereals and legumes, potatoes, forage crops). Arable land--433,100 hectares.
Industry (26% of 2006 GDP): Types--engineering, electronics, wood and wood products, and textiles.
Services (70% of 2006 GDP): Transit, information technology (IT), telecommunications, business services, retail, construction, real estate.
Trade: Exports (2005)--$7.85 billion. Partners--Finland 26.5%, Sweden 12.9%, Latvia 8.8%, Russia 6.5%, Germany 6.2%, Lithuania 4.8%. Imports (2005)--$ 10.34 billion. Partners--Finland 19.8%, Germany 13.8%, Russia 9.4%, Sweden 8.8%, Lithuania 6.1%, Latvia 4.7%.
Exchange rate (2006): 12.2 kroon (EEK)=U.S.$1.
Foreign direct investment (June 2006): Sweden 53.3%, Finland 20.3%, Netherlands 2.6%, U.K. 2.5%, Norway 2.5%, U.S. 2.4%, Germany 1.6%, Denmark 1.5%, Russia 1.3%.

GEOGRAPHY
Between 57.3 and 59.5 degrees latitude and 21.5 and 28.1 degrees longitude, Estonia lies on the eastern shores of the Baltic Sea on the level, northwestern part of the rising East European platform. Average elevation reaches only 50 meters (160 ft.).

The climate resembles New England's. Oil shale and limestone deposits, along with forests that cover 47% of the land, play key economic roles in this generally resource-poor country. Estonia boasts more than 1,500 lakes, numerous bogs, and 3,794 kilometers of coastline marked by numerous bays, straits, and inlets. Tallinn's Muuga port offers one of Europe's finest warm water harbor facilities.

Estonia's strategic location has precipitated many wars fought on its territory between other rival powers at its expense. In 1944, the Union of Soviet Socialist Republics (U.S.S.R.) granted Russia the trans-Narva and Petseri regions on Estonia's eastern frontier. Russia and Estonia signed a border treaty in 2005 recognizing the current border. Estonia ratified the treaty in June 2005, but Russia subsequently revoked its signature to the treaty, due to a reference the Estonian Parliament inserted regarding the Peace Treaty of Tartu.

ESTONIA ECONOMY
Estonia is considered one of the most liberal economies in the world, ranking 7^th in the Heritage Foundation's 2006 Economic Freedom Index (above the United States and just below the U.K.). Hallmarks of Estonia's free, market-based economy include a balanced budget, a flat-rate income tax system (the first in the world), a fully convertible currency pegged to the Euro, a competitive commercial banking sector, and a hospitable environment for foreign investment, including no tax on reinvested corporate profits (tax is not levied unless a distribution is made).

Estonia's liberal economic policies and macroeconomic stability have fostered exceptionally strong growth and better living standards than those of most new EU member states. The IMF projected real GDP growth at over 9% in 2006, slightly below its 2005 level. The economy benefits from strong electronics and telecommunications sectors; the country is so wired that it is nicknamed E-stonia. Bars and cafes are universally equipped with wireless connections. Skype, designed by Estonian developers, offers free calls over the Internet to millions of people worldwide. Tourism has also driven Estonia's economic growth, with beautifully restored Tallinn already a Baltic tourist landmark.

By the late 1990s, Estonia's trade regime was so liberal that adoption of EU and World Trade Organization (WTO) norms actually forced Estonia to impose tariffs in certain sectors, such as agriculture, which had previously been tariff-free. Openness to trade, rapid growth in investment, and an appreciating real exchange rate have resulted in large trade deficits in recent years. In the first six months of 2006, exports and imports both grew rapidly, with growth reaching 30.8% and 31% year-on-year, respectively.

Estonia supplies more than 90% of its electricity needs with locally mined oil shale; however, it imports all of its natural gas and petroleum (roughly 30% of total energy consumption) from Russia. Alternative energy sources such as wood, peat, and biomass make up about 9% of primary energy production. An undersea electricity cable inaugurated in December 2006 will allow Estonia to export electricity to Finland.

Notwithstanding these many achievements, the economy of Estonia still faces challenges. The income differential between Tallinn and the rest of the country has widened in recent years as the cost of living differential has narrowed. The formerly industrial northeast section of Estonia suffered from economic depression as a result of plant closings in the early 1990s, although even this region has experienced strong growth in the last two years. The labor force is shrinking due to low birth rates and emigration. This tight labor market and the government's restrictive labor and immigration policies have led to wage pressure and challenges to future competitiveness. Inflation above 3% has forced the government to push back adoption of the Euro from its original target of 2007.

The Estonian Finance Ministry predicts that the economy will grow by 8.7% in 2007. This compares with an estimated EU-wide GDP growth rate of 2.1% in 2006 and 2.4% in 2007. The unemployment rate in the second quarter of 2006 was 5.4%, below the EU-wide average of 8.5%.

Foreign Trade
Estonia is part of the European Union, and its trade policy is conducted in Brussels.

Estonia's business attitude toward the United States is positive, and business relations between the two countries are increasing. The primary competition for American companies in the Estonian marketplace is European suppliers, especially Finnish and Swedish companies.

Total U.S. exports to Estonia in 2005 were $138.4 million, forming 1.4% of total Estonian imports. In 2005 the principal imports from the United States were electronics, iron and steel, and machinery. Estonian exports to the United States grew 27% in 2005 to $240 million, making the U.S. Estonia's eighth-largest export market. U.S. imports from Estonia are primarily mineral fuels and oils, wood and wood products, and electronics.

Estonia's economy benefits from its location at the crossroads of East and West. Estonia lies just south of Finland and across the Baltic Sea from Sweden, both EU members. To the east are the huge potential markets of northwest Russia. Estonia's modern transportation and communication links provide a safe and reliable bridge for trade with former Soviet Union and Nordic countries. Many observers also see a potential role for Estonia as a future link in the supply chain from the Far East into the EU.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at the U.S. Department of Commerce's site and at the U.S. Embassy in Tallinn's website at http://estonia.usembassy.gov/commguide.php. They also can be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRAD(E) or by fax at 1-202-482-4473.

DEFENSE
Estonia's regular armed forces--the Estonian Defense Forces--in peacetime number about 3,800 (Army 3,300, Navy 300, Air Force 200) persons, of whom about 1,500 are conscripts. The President of Estonia is the Commander in Chief of the Estonian Defense Forces. The National Defense Council, composed of the Chairman of the Parliament, the Prime Minister, the Chief of the Defense Forces, the Defense Minister, the Minister of Internal Affairs, the Minister of Foreign Affairs, and the Chairman of the Parliamentary National Defense Committee, advise the President on national defense matters.

Estonia officially became a member of the North Atlantic Treaty Organization on March 29, 2004 after depositing its instruments of treaty ratification in Washington, DC. The United States and Estonia cooperate intensively in the defense and security field.

Estonian defense spending has increased 13% annually since 2001. The Government of Estonia has expressed a firm commitment to meet the NATO goal of spending 2% of GDP by 2010; its current defense budget is 1.8% of GDP. In 2006, Estonia had deployed approximately 300 military personnel to support UN, NATO, and coalition military operations around the world and will increase its commitment in 2007. That number represents almost 10% of Estonia's military, a good indication of Estonia's willingness and ability to contribute to global security. Estonia currently has troops in Afghanistan, Iraq, Kosovo, and Bosnia.