ESTONIA REMAINS FAR FROM NORDIC STANDARDS OF LIVING.

Publication: Monitor Volume: 7 Issue: 84

Estonian policymakers have presided over a robust economy over the past few years, and the country, in addition to being a frontrunner for European Union accession, is often perceived as a neo-Scandinavian country. In reality, however, it will be decades until Estonians achieve the standards of living of even the poorest EU members, let alone the neighboring Nordic lands. An economic program prepared recently by the Estonian Finance Ministry in preparation for EU accession observed that if per capita GDP is to reach even 50 percent of the EU average by 2010, GDP must continue to increase by 5-6 percent per annum for the next ten years (BNS, April 17). The Finance Ministry is not being overly pessimistic.

In 2000, Estonia’s per capita GDP measured at a purchasing power parity exchange rates (which equalize the purchasing power of the dollar in the United States and Estonia) was US$9,700, compared to an EU12 average of about US$21,700. Under the assumption of a healthy 4.8 percent rate of annual GDP growth over the next decade, Estonia’s per capita GDP would rise to US$15,600 in 2010. According to forecasts conducted by Standard & Poor’s DRI economic research unit, average GDP in the eurozone is expected to rise by about 2.6 percent per annum over that period, yielding a per capita GDP of US$27,500 in the EU12 in 2010. Estonia’s projected per capita GDP a decade from now would compare very favorably with Lithuania’s US$6,000, and would not be much below Greece’s US$18,200. But it would still be well below Norway’s US$33,500, or even Slovenia’s US$24,200.

Although the EU regards Estonia as a single region due to its small size, there are large and growing income disparities within Estonia. While the average monthly net income per household member in Estonia was 2,336 kroons (US$132) in urban areas last year, it was only 1,615 kroons (US$91) in rural areas (BNS, April 4). Disposable incomes in rural areas are one-third below urban area averages. Compared to average gross monthly wages of 5,279 kroons (US$293) in the fourth quarter last year, Tallinnites made 6,465 kroons (US$359), while residents of Voru county in the Northeast grossed only 3,696 kroons (US$205) per month (Estonian Statistics 2001 Monthly No. 110) For the country as a whole, there is a 12-fold difference between the disposable income in the poorest 10 percent of households (607 kroons per household member) and households in the top 10 percent (7,426 kroons) (Estonian Statistics 2001 Monthly No. 109).

In short, poor households in Estonia’s rural northeast are generations away from attaining the standards of living commonly associated with EU membership–the standards evident just a few hours to the north. Perhaps coincidentally, Estonia’s Russian-speaking population is concentrated in the northeastern part of the country.

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