While Estonia transformed itself into a very dynamic small economy within a couple of decades, the country is still facing some core challenges that bring its reputation as an economic miracle a little closer down to earth.
Being a small country of a little over a million people, it’s heavily reliant on exports (72.2 percent of GDP), which leaves the country at the mercy of the economies of its major trading partners, namely Finland, Sweden, and Latvia. As Estonia’s top exports are things like broadcasting equipment, refined petroleum, automobile, and prefabricated buildings, a hiccup in the EU could bring a portion of the Estonian dream crumbling down.
Furthermore, a lack of investment for big infrastructure projects is also an issue. While the country’s population centers are fully modern, the hinterlands have been left behind.
“If you get on the train and you want to go to Riga, in Latvia, you're on a train with wooden benches and you're sharing it with some woman who's got a sheep by her,” Maclaren explains. “They have no money to put into things like the rail infrastructure, and if you drive through Estonia you've got a long, long way before you see anyone else.”
And while China has been keen to invest in Estonian infrastructure via its Belt and Road initiative, Estonia has so far adopted the EU’s cautious position, although this could change in the near future.
Staying ahead of the pack
Meanwhile, one of the biggest problems in the country that’s known for being led by the young is ironically its rapidly aging population. More than 17.7 percent of the Estonian population is over the age of 65, which has fast become a drain on the country’s resources and presents a question as who is going to care for them – especially as Estonia’s population is expected to significantly decrease in the near future.
All in all, Estonia was successfully able to build its economy and social systems up from scratch, leapfrogging many previously more advanced nations by taking a risk on the latest technologies, shoring up debt, and deploying innovative public services. But how long can the country stay ahead of the pack when the other Baltic countries as well as larger nations through Eastern Europe are now advancing with many of the same strategies?
“It's very hard, let's be honest,” Lember admits. “Of course, many countries want to catch us and be ahead of us, but you have to improve your system every year, step by step. If you're smart, just improve the system every year.” — Wade Shepard