## Republic of Estonia: Selected Issues

_IMF Staff Country Reports, June 21, 2024_

## Source details

**Canonical URL:** [Republic of Estonia: Selected Issues](https://www.imf.org/en/publications/cr/issues/2024/06/20/republic-of-estonia-selected-issues-550800)

## Other formats

- [Markdown version](/en/publications/cr/issues/2024/06/20/republic-of-estonia-selected-issues-550800/index.md)
- [Structured JSON version](/en/publications/cr/issues/2024/06/20/republic-of-estonia-selected-issues-550800/index.json)
- [Bundle manifest](/en/publications/cr/issues/2024/06/20/republic-of-estonia-selected-issues-550800/bundle-manifest.json)

## Bibliographic details
- Published: June 21, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400278334.002

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### Overview and main findings
- Estonia’s export market share has fallen sharply, signalling that exporters have difficulties to keep up with foreign competition.
- The immediate cause of the decline can be traced back to an adverse combination of external shocks triggered by the war in Ukraine.
- Signs of faltering export performance surfaced already in the aftermath of the global financial crisis, and thus predate recent shocks.
- Using a constant share decomposition, the paper shows that, unlike in Latvia and Lithuania, a significant portion of the decline in Estonia’s export share can be attributed to the “intensive margin,” i.e., a shrinking share of Estonia’s exports in the main destination markets—interpreted as a sign of weakening external competitiveness and declining relative productivity.

### Analysis and methodology
- Analytical approach: constant share decomposition to separate extensive and intensive margins of export share changes.
- Comparative finding: the intensive-margin driven decline in Estonia contrasts with patterns observed in Latvia and Lithuania.
- Interpreted drivers: weakening external competitiveness and declining relative productivity in Estonia’s export sectors.

### Policy implications and recommendations
- Addressing the erosion of external competitiveness will require structural reforms aimed at enhancing productivity.
- Remove impediments to a structural transformation of the economy toward more technologically intensive and higher value-added products and services.
- Ensure that real wage growth remains closely aligned with productivity growth.
- By addressing these underlying challenges, Estonia can restore external competitiveness and ensure continued convergence toward the income levels of EU most advanced economies and Nordic neighbors.

### Subjects and keywords
- Subject: Capital adequacy requirements, Expenditure, Exports, Financial regulation and supervision, International trade, Production, Productivity, Total factor productivity
- Keywords: Baltics, Capital adequacy requirements, Estonia's government spending, Europe, export market share, export share decline, Exports, Global, labor market liberalization, Productivity, tax revenue-to-GDP ratio, TFP dynamics, Total factor productivity, Within-Sector allocative efficiency

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## Content in this bundle

- **Republic of Estonia: Selected Issues; IMF Country Report No. 24/178; May 23, 2024**
  - [Republic of Estonia: Selected Issues; IMF Country Report No. 24/178; May 23, 2024 (Markdown version)](/-/media/files/publications/cr/2024/english/1estea2024002.pdf.md){rel="alternate" type="text/markdown"}
  - [Republic of Estonia: Selected Issues; IMF Country Report No. 24/178; May 23, 2024 (PDF)](/-/media/files/publications/cr/2024/english/1estea2024002.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2024/06/20/republic-of-estonia-selected-issues-550800_