Estonia

Despite a loosening of its past focus on fiscal discipline, Estonia falls into the top ranks internationally (rank 6) with regard to economic policies. Its score in this area is unchanged relative to its 2014 level.

After a steep decline in GDP in mid-2020, growth returned to modest levels. The government engaged in robust fiscal support programs, boosting deficits and increasing the national debt. Companies received wage support in turn for keeping workers in employment, effectively combating poverty and preventing widespread job loss.

Employment rates returned to pre-crisis levels in 2021, with labor shortages becoming a bigger concern than unemployment. High tax rates on labor and strict immigration rules have prevented the country from attracting badly needed foreign workers.

While debt levels remain low by international standards, it now appears that balanced budgets are unlikely under the current tax system. This includes a flat income tax of 20%, and no appreciable capital taxes. There is widespread consensus that the system needs revision. Many cryptocurrency companies are registered in Estonia, prompting calls to bolster the currently lax regulatory requirements.

Despite gaps in some areas, Estonia scores well in international comparison (rank 11) with respect to social policies. Its score in this area has improved by 0.2 points relative to 2014.

Educational outcomes are generally very strong, but a high share of the unemployed have tertiary degrees. Policymakers are thus seeking to strengthen links between education and labor-market needs. Social transfers have not kept pace with wage increases, exacerbating relative poverty. Regional and gender income disparities are significant.

Healthcare coverage is largely tied to employment or education status, leaving some without free access. Recent reforms have improved access. The social exclusion of ethnic minorities has decreased over time. Ethnic minority children are increasingly learning in Estonian-language classrooms, improving integration.

Parental leave benefits are generous, but prioritize stay-at-home parents over working parents. Access to childcare is good for over-threes. A policy allowing early withdrawal of voluntary-pillar pension funds has sharply exacerbated sustainability risks in the system. Crime levels have declined in recent years, but drug trafficking and cybercrimes are increasing.

With a generally strong record in recent years, Estonia receives high rankings in international comparison (rank 11) with regard to environmental policies. Its score in this area is unchanged relative to its 2014 level.

By 2030, the country aims to reach a 50% renewables share for total energy consumed, and an 80% share for heat energy. An effort to increase building energy efficiency is underway, with new buildings required to meet a near zero-energy standard. By 2050, the country seeks to decrease greenhouse gas emissions by nearly 80% compared to 1990.

Water pollution has decreased in recent years thanks to renovation of the water infrastructure. Deforestation rates have gathered pace in recent years. Waste recycling is a weak point. Road construction and increasing traffic pose a serious risk to biodiversity.

The country has swung to support EU energy and climate goals, and is negotiating a national plan. It contributed €1 million in 2021 to help least developed countries adapt to climate change.

With transparency and access improving thanks to sophisticated online tools, Estonia falls into the top ranks internationally (rank 5) in the area of democracy quality. Its score in this area has improved by 0.3 points relative to 2014.

Internet voting has become increasingly common. Campaign information is increasingly available in Russian as a means of engaging ethnic minorities in electoral processes. Campaign-finance transparency rules and oversight powers have been periodically strengthened, and the powers of the independent monitoring body are being enhanced.

Civil rights are widely respected. COVID-19-era restrictions on public events were modest. Gender equality remains a challenge despite new rules targeting pay gaps and labor-market inequalities. LGBTQ+ rights continue to be disputed.

Corporate-ownership disclosure rules have been strengthened, improving transparency. However, lobbying remains unregulated. Online media are providing a growing range of in-depth stories and analysis, while traditional media ownership is increasingly concentrated. Government ministers’ refusal to respond to journalists’ queries is an ongoing concern.

As past policy-development reforms bear fruit, Estonia falls into the upper-middle ranks (rank 17) in the area of executive capacity. Its score in this area has improved by 0.1 point relative to its 2014 level.

Responsibility for the strategic-planning framework has been transferred from the Ministry of Finance to the government office, increasing the prime minister’s power. However, this strategy unit does not evaluate line-ministry proposals. While policy initiatives are discussed in the coalition council and in cabinet meetings, advance communication with the prime minister’s office has weakened.

Policymaking and policy monitoring are bolstered by highly advanced digital tools. The RIA framework is well developed, but assessments are not well communicated to the public. Stakeholders are consulted during policy preparation. Contradictory statements from different governing-coalition parties and civil servants have become more common, especially during the COVID-19 era.

A major municipal-merger reform, which included the abolition of county governments, has made funding more efficient and enhanced local autonomy. Labor shortages have made it difficult to maintain national standards across the country. An effort to streamline the government bureaucracy is underway.

With its policy-oversight institutions having improved their capabilities significantly over time, Estonia scores well (rank 8) with regard to executive accountability. Its score in this area has improved by 1.4 points relative to its 2014 level.

Citizens are avid media consumers, and internet penetration levels are high. Extensive use of social media by advocacy groups and radical social movements increases the dissemination of biased information and fake news. While media offer considerable in-depth information, reporting tends to focus on decisions only after they have been made.

Parliamentarians have only modest resources, but strong formal oversight powers. The National Audit Office has become more active in communicating with the public, helping to spur policy improvements. The Legal Chancellor performs ombuds functions, but is not attached to the parliament, while the Data Protection Inspectorate is responsible for protecting citizen privacy and personal data.

Political-party decision-making is centralized. Trade union and employers’ associations have expanded their analysis and policy-proposal capacities in recent years. Other civil society groups tend to have limited financial and human resources. Religious groups have been increasingly active in domestic politics.