2022 OECD ECONOMIC SURVEY OF ESTONIA 28 June 2022
Strengthening growth in an uncertain environment
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www.oecd.org/economy/estonia-economic-snapshot/
Strong growth is now slowing due to the war in Ukraine Real GDP
Index 2019 Q4 = 100 112
Forecast
108 104 100 96 92
2019
2020
2021
2022
2023
Source: OECD Economic Outlook 111 database and OECD calculations.
2
Labour market is strong but still below pre-pandemic performance Employment rate
Unemployment rate
% of working-age population 15-64
%
80
21
EST OECD
75
FIN LVA
LTU
FIN OECD
LTU
18 15
70
12
65
9
6
60 55
EST LVA
3 2008
2011
2014
2017
2020
0
2008
2011
2014
2017
2020
Source: OECD Labour Market Statistics.
3
Inflation is accelerating sharply Headline inflation Y-o-y % changes 20
Core inflation Y-o-y % changes 20.0
EST
Baltics
EU27
15
15.0
10
10.0
5
5.0
0
0.0
-5
2006
2009
2012
2015
2018
2021
-5.0
2006
2009
EST
2012
Baltics
2015
EU27
2018
2021
Source: OECD.
4
Wages are now growing less than inflation, weighing on purchasing power Nominal wage growth and inflation Year-on-year % change 21
Wages
18
Headline inflation
15 12 9 6 3 0 -3
2019
2020
2021
2022
Source: OECD.
5
Estonia is hosting many Ukrainian refugees relative to its population Refugees from Ukraine 2022 % of population 4,0 3,5 3,0 2,5 2,0 1,5 1,0
0,5 0,0
TUR
ITA
HUN
ESP
ROU
DEU
BGR
SVK
EST
POL
MDA
CZE
Note: the data is updated to June 9, 2022. Source: UN Ukraine refugee situation, Situation Ukraine Refugee Situation (unhcr.org) .
6
Public debt grew but remains very low General government debt % of GDP
140 120
2021Q4
2019
100
80 60 40 20 0 EST
LTU
LVA
FIN
SVN
OECD
Note: Based on the general government debt Maastricht criterion, with the exception of the OECD average. Source: OECD Economic Outlook database.
7
Policies for a resilient and balanced recovery
8
Vocational education and training should be strengthened Participation of 15-24 year-olds in vocational education and training %
2018
% 40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
CRI COL LTU ISL NZL EST DNK MEX SWE GRC AUS CHL KOR ISR ESP PRT LVA OECD NOR GBR HUN FRA POL FIN DEU ITA LUX SVK NLD CHE BEL TUR AUT SVN
40
Source: OECD Improving the Provision of Active Labour Market Policies in Estonia (2021). 9
Active labour market policy should focus on tackling skills obstacles Share of working-age people with weak attachment to the labour market in Estonia receiving ALMPs by their labour market obstacles 2017-2019 %
Labour market services
Training
Employment incentives
Supported employment/rehab, direct job creation & start-up incentives
%
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
Health
Geographic distance
Motivation
Skills and qualification
0
Source: OECD Improving the Provision of Active Labour Market Policies in Estonia (2021).
10
Tax revenues are tilted toward indirect taxation Tax revenue decomposition 2020 Personal income tax Social security contributions Taxes on goods and services
Corporate income tax Property taxes Other
% of total taxation 100 80 60 40
OECD
NORDICS
ISL
DNK
FIN
SWE
NOR
BALTICS
LVA
LTU
0
EST
20
Source: OECD Tax Revenue database. 11
There is room to increase taxation on capital income Overall tax rate on dividends % 60
(personal plus corporate income taxes) 2022
% 60 50
40
40
30
30
20
20
10
10
0
0
EST LVA HUN GRC SVK LTU POL CHE ISL CZE TUR NZL CHL CRI LUX SVN COL OECD MEX FIN ITA JPN SWE ESP AUT NLD AUS USA BEL DEU ISR NOR PRT GBR FRA DNK CAN IRL
50
Source: OECD Tax Revenue database Table II4.
12
Poverty remains a challenge Poverty rate % 30
2019 or latest available
25 20 15 10
0
ISL CZE SVK DNK FIN SVN IRL NOR FRA HUN AUT NLD BEL DEU POL CHE SWE PRT GRC LUX OECD CAN GBR NZL AUS ITA ESP JPN TUR EST LTU KOR LVA MEX ISR CHL USA CRI
5
Note: Data refer to the total population and are based on equivalised household disposable income, i.e. income after taxes and transfers adjusted for household size. The poverty threshold is set at 60% of median disposable income in each country. The incomebased poverty rates exclude lump-sum payments, which are frequent in the retirement schemes of some countries (e.g. Australia, Switzerland). CEEC is the average of Hungary and the Czech and Slovak Republics. Source: OECD Income Distribution Database (IDD), http://stats.oecd.org/Index.aspx?DataSetCode=IDD, and Statistics Estonia. 13
Transfers could be better targeted Share of public cash transfers received by working-age individuals in low and high-income groups % 50
2020 or latest available Poorest quintile
Richest quintile
% 50 40
30
30
20
20
10
10
0
0
TUR ITA CRI GRC ESP LUX PRT CHL LVA POL HUN AUT JPN EST LTU USA SVK KOR ISR FRA OECD BEL SVN MEX IRL NOR DEU ISL CZE CAN CHE SWE GBR DNK NLD AUS FIN NZL
40
Source: Calculations based on OECD Income Distribution Database and OECD Tax-Benefit Models, via http://www.oecd.org/els/soc/benefits-and-wages.htm 14
The minimum wage could be increased to reduce in-work poverty Minimum relative to average wages of full-time workers Ratio 70
2020
Ratio 70 60
50
50
40
40
30
30
20
20
10
10
0
0
USA HUN LVA CZE IRL EST JPN NLD TUR GRC ISR BEL LTU MEX SVK OECD30 CAN DEU LUX POL ESP PRT AUS GBR CRI SVN FRA CHL KOR NZL COL
60
Source: OECD Employment and Labour Market Statistics, Statistics Estonia.
15
The gender pay gap remains high Difference between male and female median wages divided by the male median wage 2020
% 35 30 25 20
15 10
0
CRI BEL COL NZL NOR DNK IRL SWE ITA SVN CHL ESP POL GRC MEX HUN TUR SVK OECD LTU PRT FRA AUS GBR CZE NLD ISL AUT CHE DEU CAN FIN EST USA LVA JPN ISR KOR
5
Note: The gender wage gap is defined as the difference between male and female median wages divided by the male median wage. Source: OECD Employment and Labour Market Statistics. 16
Addressing climate change
17
Estonia is aiming for net zero GHG emissions by 2050 Total greenhouse gases including LULUCF GHG thousands of tonnes of CO2 equivalent 40000
40000
35000
35000
30000
30000
25000
25000
20000
20000
-70% by 2030
15000
15000 10000
5000 0 1990
10000
2020 provisional data
1995
2000
2005
2010
2015
2020
5000 2025
2030
2035
2040
2045
2050
0
Note: Latest data is for 2019. Data for 2020 is preliminary and estimates LULUCF emissions based on 2019 data. LULUCF stands for land use, land use change and forestry. The targets represent a 70% GHG emission reduction by 2030 relative to 1990 (Paris Agreement) and a climate neutrality goal by 2050 (Strategy Estonia 2035), shown here as zero emissions in 2050. Source: OECD Environment database on greenhouse gas emissions. 18
The carbon intensity of the economy is high but falling Total greenhouse gases excluding LULUCF per unit of GDP kg of CO2 equivalent per 1000 USD 0,70
2019
2005
0,60 0,50 0,40 0,30 0,20
0,00
CHE SWE IRL DNK FRA NOR GBR CRI LUX AUT ESP ITA PRT NLD DEU LVA HUN FIN BEL LTU TUR SVK SVN JPN ISR ISL CHL OECD GRC CZE MEX POL EST USA KOR NZL CAN AUS
0,10
Note: LULUCF stands for land use, land use change, and forestry. Source: OECD Environment database on greenhouse gas emissions. 19
Carbon pricing should be higher and more comprehensive Share of emissions priced above EUR 60 per tonne of CO2 2018 80 70
60 50 40 30 20 10 USA CHL EST KOR CZE COL JPN NZL AUS CAN DEU POL TUR SVK SWE LVA BEL HUN FIN AUT OECD PRT GBR GRC MEX ESP ISR FRA NLD IRL ITA DNK LTU ISL SVN NOR LUX CHE
0
Note: this includes emissions from the combustion of biomass. Source: OECD Effective Carbon Rates (ECR) database. 20
Oil shale accounts for a large share of primary energy supply Total primary energy supply 2020 Oil Nuclear Wind, solar and geothermal
Natural gas Biofuels and waste
Coal, peat and oil shale Hydro
ISL SWE FIN NOR FRA CHE CRI LVA DNK NZL SVN SVK LTU AUT HUN BEL ESP EST CZE PRT CHL CAN GBR DEU ITA LUX USA KOR GRC TUR IRL JPN POL MEX NLD AUS ISR
% 110 100 90 80 70 60 50 40 30 20 10 0 -10
% 110 100 90 80 70 60 50 40 30 20 10 0 -10
Source: IEA World Energy Balances database.
21
Oil shale production is concentrated in Ida-Viru, where poverty is the highest Geographical decomposition of poverty 2020
Ida-Viru region
Source: Statistics Estonia, Estonian Social Survey (EU SILC) 2021. 22
Labour market policies could better support workers during the transition Spending on active and passive labour market policies 2019 % of GDP 5.0
Active measures (10-70)
4.5
% of GDP 5.0
Passive measures (80-90)
4.5
NZL
DNK
AUS
FRA
ESP
FIN
BEL
AUT
NLD
ITA
SWE
DEU
OECD
LUX
PRT
CHE
0.0
EST
0.0
USA
0.5 IRL
0.5 KOR
1.0
HUN
1.0
CAN
1.5
NOR
1.5
LTU
2.0
ISR
2.0
SVN
2.5
LVA
2.5
SVK
3.0
CHL
3.0
POL
3.5
CZE
3.5
JPN
4.0
MEX
4.0
Source: OECD Labour Market Programmes database.
23
There is scope to expand and diversify renewable energy supply Renewable energy production in total energy supply 2020 or latest available % 100 90
Biofuels and waste
Wind, solar
Hydro
Geothermal
% 100 90
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
KOR ISR JPN AUS USA MEX NLD BEL POL LUX HUN FRA CZE SVK IRL GBR GRC TUR CAN ESP DEU SVN ITA LTU COL CHE PRT CHL AUT FIN EST NZL DNK LVA SWE CRI NOR ISL
80
Note: Bioenergy includes solid biofuels, renewable waste, liquid biofuels and biogases. Hydro includes hydropower (excluding pumped storage), and tidal, wave and ocean energy. Data is for 2020 or latest year available. Source: IEA World Energy Balances database. 24
Higher R&D investment could support the green transition Research and development spending by government and business enterprise % of GDP
2020 or latest available
% of GDP
5
5 Government
Business enterprise 4
3
3
2
2
1
1
0
0
MEX CHL COL LVA SVK LTU TUR LUX POL IRL CAN PRT GRC ESP NZL AUS ITA EST GBR HUN NOR CZE EU27 NLD ISL FRA SVN DNK CHE FIN OECD AUT DEU SWE BEL JPN USA KOR ISR
4
Source: OECD MSTI database. 25
Low-carbon transport alternatives to cars should be further promoted Private car density rates across countries 2020 or latest available Passenger cars/ 1000 inhabitants 800
Passenger cars/ 1000 inhabitants 800 700
600
600
500
500
400
400
300
300
200
200
100
100
0
TUR CHL MEX ISR KOR LVA USA HUN SVK IRL DNK PRT SWE GBR JPN NLD OECD BEL GRC ESP NOR CHE FRA CZE SVN LTU AUT AUS DEU EST CAN POL NZL FIN ITA LUX ISL
700
0
Source: UNFCCC (2020), OECD ITF database.
26
Energy efficiency in buildings could be improved Energy consumption of households for space heating 2019 koe/m²
koe/m²
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
PRT ESP GRC NLD SWE IRL GBR EU ITA SVK CHE FRA DEU LTU DNK FIN SVN POL AUT LUX EST CZE HUN LVA
0
Note: Latest data is for 2019. The comparison shows energy consumption by households for space heating. Source: ODYSSEE-MURE. 27
For more information
https://www.oecd.org/economy/estonia-economic-snapshot/
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