THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Estonia

Ranked 26th of 149

At a glance

Ranks

26 th on the Legatum
Prosperity Index™

27th
26th
20th
29th
55th
43rd
32nd
71st
7th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Estonia performs best on Natural Environment and Governance and scores lowest on the Social Capital sub-index.

Visit our Rankings table to see how Estonia compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Estonia has tripled its prosperity surplus over the past decade, far outperforming the other Baltic states. Social Capital and Health are the only sub-indices in which Estonia sees a prosperity deficit.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Estonia, along with Latvia and Lithuania, was nicknamed a ‘Baltic Tiger’ because of high GDP growth rates before 2008, which were some of the fastest in the world at the time. Like the other Baltic states, it was severely affected by the global financial crisis, but has now returned to growth. The Prosperity Index captures this decline and recovery in the Economic Quality sub-index since the crisis: Estonia ranked 27th in 2007, 38th in 2010 and 27th again in 2016. However, it still performs worse overall than in 2007. Unemployment went from 4.7% in 2007 to peaking at 16.9% in 2010 down to 7.7% in 2016, which, nevertheless, is below the OECD average. It has the lowest absolute poverty of the Baltics. Its Economic Quality Score is at the EU average and just below the OECD average.

In the Business Environment, Estonia has made good progress, moving up four ranks to 26th in the past decade. The government continued to push ahead with market reforms, making the business environment more competitive and attractive for investors. Redundancy costs have been reduced, while hiring/firing practices are among the most flexible in the OECD. It outperforms its Baltic peers, though Latvia has made quicker progress over the same period and is catching up with its northern neighbour.

Estonia leads the Baltics when it comes to a competitive and flourishing business environment!
Estonia leads the Baltics when it comes to a competitive and flourishing business environment!

Governance is Estonia’s second best performing sub-index: it ranks 20th, having moved up eight ranks since 2007, outperforming countries like the US, Japan, and France. It ranks at the OECD average and above the EU average, which is impressive given that many post-Communist states continue to struggle with governance issues, notably corruption. There is less perception of widespread corruption in Estonia than in any other post-Communist EU state. Judicial independence and rule of law are both strong, being the highest in the Eastern European region.

Estonia’s strong performance in Governance sees it move up into the global top 20 of this sub-index.
Estonia’s strong performance in Governance sees it move up into the global top 20 of this sub-index.
Estonia leads Eastern Europe states in the fight against corruption.
Estonia leads Eastern Europe states in the fight against corruption.

Despite an overall improvement in the Personal Freedom sub-index over the past decade, there has been a downward trend in the perception that Estonia is a good place for immigrants and people of ethnic minorities to settle in since 2014. Among OECD member states, Estonia appears to be the least tolerant towards immigrants and minorities as of 2016.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.