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OECD's 2015 Economic Survey of Estonia examines recent economic developments, prospects and policy. Special chapters cover openness and raising productivity and making the most of human capital.

Estonia can revitalise productivity growth and reap more benefits from its openness. Productivity is relatively low in manufacturing and in large firms, as the manufacturing sector focuses on low-technology goods exports to only a small number of destinations. The economic impact of the Estonian R&D system still appears to be limited, also because of a lack of knowledge transfer. Building on Estonia’s favourable business environment, productivity growth could be raised by promoting smart specialisation and innovation; removing remaining barriers to entrepreneurship and competition; ensuring access to finance for SMEs; upgrading infrastructure; and improving energy efficiency.

This annex reviews action taken on recommendations from previous Surveys. They cover the following areas: fiscal policy, labour market policies, education policies, health policies, public sector efficiency, globalisation, financial sector and green growth. Each recommendation is followed by a note of actions taken since the October 2012 Survey. Recommendations that are new in this Survey are listed in the relevant chapters.

Estonia experienced strong growth of loan-financed domestic demand after EU accession in 2004, followed by the burst of the real estate bubble and the international financial crisis. The economy recovered quickly. Regulatory settings are generally favourable to sustain growth and the government is initiating further substantial structural reforms. The fiscal position is strong and macroprudential policies have been strengthened. However, in recent years economic growth has slowed, in part due to weak external demand. Real GDP per capita is still lower than in the boom peak of 2007. The productivity gap with respect to high-income countries is currently diminishing only slowly. Skill mismatches contribute to structural unemployment and emigration is reducing labour supply. At unchanged policies higher income growth will tend to raise greenhouse gas emissions, which are among the highest in the OECD in relation to GDP. Key challenges for Estonia are therefore to raise productivity growth, including by making the most of human capital, while containing greenhouse gas emissions.