Country report Estonia - Work Package 1 Ex post evaluation of Cohesion Policy programmes 2007-2013, focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF)

After the strong economic expansion between 2000-2007, Estonia was hit severely by the global economic recession, with GDP falling by 10% a year over the two years 2007-2009. From 2010 on, the economy began to recover, mainly driven by exports. However, the pace of growth declined after 2013 and in 2015 the rate was only around 1%. The crisis had a major effect on the labour market, the proportion of working-age population in employment falling by 7 percentage points between 2007 and 2009 and the unemployment rate increasing from under 5% to over 12%. The subsequent period of growth, however, led to the employment rate returning by 2015 to much the same level as before the recession hit and unemployment falling to just over 6% of the labour force.

Despite the deep recession, the public sector balance, which was in surplus in 2007, moved into only a relatively small deficit in 2009 and tight fiscal policies together with economic growth led to the balance moving into surplus again in 2011 and the budget remaining in broad balance up to 2015. Although public investment was reduced after the recession, it remained at around 5% of GDP from 2011 on, higher than in most EU12 countries.

Over the 2007-2013 period, regional disparities continued to be marked between the capital city and the rest of the country, with economic development remaining largely concentrated in Tallinn.