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Estonia improved its international competitiveness for the third year in a row

According to the yearbook of Estonia's international competitiveness, Estonia rose from 22nd position from 26th place in 2021 (among 64 countries). The yearbook commissioned by the Estonian Innovation Agency and prepared by the Estonian Institute of Economic Research is based on the data from the World Competitiveness Yearbook of the Swiss institute IMD.

“Estonia stands out positively in the sub-factors of prices and business legislation, and our high ranking education system rose three places in the index and is now in 14th place,” said Sigrid Harjo, member of the board of the Estonian Innovation Agency.

Good results in the PISA tests, high public sector spending on education as a percentage of GDP, the compliance of primary and secondary education with the requirements of a competitive economy and the acquisition of education by many Estonian students abroad contribute to the high position of education.

In addition, Estonia stands out positively in the sub-factor of the business legislation, where the ease of establishing a business, the number of newly founded companies, conducting the business establishment procedure in three steps and the company median establishment time 3.5 days. Estonia also had a relatively good position in efficiency of the government’s work, where Estonia ranks 18th. This category takes into account the balance of the state budget, the level of taxes, the level of development of state institutions, business legislation and the social framework.

The biggest leap was made in the sub-factor of Estonia’s domestic economy. The strengths were a relatively small drop in GDP of -2.9% in the first year of the Covid crisis, an acceleration of capital investment growth to 19% and an increase in the share of capital investment to 31% of GDP.

In foreign investment flow as a percentage of GDP, Estonia ranked 7th among the 65 countries, while it was 10th in terms of investment inflow as a percentage of GDP. Considerable rise in FDI inflow occurred, the absolute amount of FDI being the largest in the past 20 years. Estonia’s FDI inflow as a percentage of the GDP was fourth-largest in Europe and largest among the Baltic Sea countries featured in the rankings.

Estonian Institute of Economic Research Director Marje Josing commented that the country’s competitiveness is especially important in internationally complex and difficult times for the global economy. “In 2020, the world was hit by the Covid-19 pandemic, which has shaken the economies and supply chains of countries. In such circumstances, those countries are more successful where the entire economic environment (legislation, infrastructure, government activities, etc.) allows companies to be flexible and innovative and to compete with entrepreneurs from other countries. It is very important for a small country to be able to continue and develop the export of goods and services even in difficult economic conditions,” commented Josing.

The Competitiveness Yearbook summarizes the 2021 results of the International Competitiveness Index compiled by IMD. The IMD rating shows how countries create and maintain a competitive economic environment.

The methodology developed by IMD for assessing the international competitiveness of countries has found wide international recognition. When calculating the competitiveness rating, 255 criteria were taken into account, of which 163 were statistical (quantitative) and 92 were data collected from company managers through a survey (evaluative).

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