Baltic Tiger
Encyclopedia
Baltic states
The term Baltic states refers to the Baltic territories which gained independence from the Russian Empire in the wake of World War I: primarily the contiguous trio of Estonia, Latvia, Lithuania ; Finland also fell within the scope of the term after initially gaining independence in the 1920s.The...
of Estonia
Estonia
Estonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
, Latvia
Latvia
Latvia , officially the Republic of Latvia , is a country in the Baltic region of Northern Europe. It is bordered to the north by Estonia , to the south by Lithuania , to the east by the Russian Federation , to the southeast by Belarus and shares maritime borders to the west with Sweden...
, and Lithuania
Lithuania
Lithuania , officially the Republic of Lithuania is a country in Northern Europe, the biggest of the three Baltic states. It is situated along the southeastern shore of the Baltic Sea, whereby to the west lie Sweden and Denmark...
during their periods of economic boom, which started after the year 2000 and continued until 2006–2007. The term is modeled on Four Asian Tigers and Celtic Tiger
Celtic Tiger
Celtic Tiger is a term used to describe the economy of Ireland during a period of rapid economic growth between 1995 and 2007. The expansion underwent a dramatic reversal from 2008, with GDP contracting by 14% and unemployment levels rising to 14% by 2010...
, which were used to describe the economic boom periods in parts of East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...
and Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
, respectively.
After 2000, the Baltic Tiger economies implemented important economic reforms and liberalisation, which, coupled with their fairly low-wage and skilled labour force, attracted large amounts of foreign investment and economic growth. Between 2000 and 2007, the Baltic Tiger states had the highest growth rates in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
. In 2006, for example, Estonia
Estonia
Estonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
grew by 11.2% in gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, while Latvia grew by 11.9% and Lithuania by 7.5%. All three countries by February 2006 saw their rates of unemployment falling below average EU values. Additionally, Estonia is among the ten most liberal economies in the world and in 2006 switched from being classified as an upper-middle income economy to a high-income economy by the World Bank. All three countries joined the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
in May 2004. Estonia adopted the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
in January 2011 whilst Latvia and Lithuania do not have a specified date, but are predicted to do the same in the following years.
The Baltic economies were predicted to continue growing at a high annual rate of 5–10% until at least 2010. In the 2000–2010 decade, gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
was expected to rise dramatically, similar to what happened in Ireland during its 1990s economic boom. While their GDP per capita is currently at approximately 60–75% of the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
average, they are expected to rapidly converge in income, even though EU average income is not expected to be reached in the near future. Even their present status at approximately 65% of the EU average is a remarkable improvement in such a short time, considering that in 1999, Latvia and Lithuania had a GDP per capita at only 25% of the EU average.
One negative characteristic of the Baltic states' economic growth has been a substantial growth in the current account deficit and external imbalances. This led some economists to correctly predict a risk for a 'hard landing
Hard landing (economics)
A hard landing in the business cycle is an economy rapidly shifting from growth to slow-growth to flat as it approaches a recession, usually caused by government attempts to slow down inflation...
' scenario and financial crises in Latvia and Estonia. On the other hand, they were very low government debt
Government debt
Government debt is money owed by a central government. In the US, "government debt" may also refer to the debt of a municipal or local government...
levels (7.1% of GDP in Estonia, 36.6% in Latvia), the central banks in both countries have reserves approaching the M1 money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
, and the biggest private banks are owned by solvent Scandinavia
Scandinavia
Scandinavia is a cultural, historical and ethno-linguistic region in northern Europe that includes the three kingdoms of Denmark, Norway and Sweden, characterized by their common ethno-cultural heritage and language. Modern Norway and Sweden proper are situated on the Scandinavian Peninsula,...
n giants.
In 2008, the economic growth slowed down in all three Baltic states (due to global financial crisis), with Lithuania's real growth rate falling to 3.0%, Latvia's −4.6% and Estonia's −3.6%. As the global financial storm swept across Eastern and Central Europe, the Baltic states' economies have been especially hard hit: Estonia
Estonia
Estonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
's GDP dropped by -16.2% year-on-year, Latvia’s by −19.6% and Lithuania’s by −16.8%. By mid 2009, all three countries were experiencing one of the deepest recessions in the world. In 2010, Estonia's economic situation stabilized and GDP expanded 3.1%, with 6.6% growth in Q4. Estonia had 8.5% growth in Q1 2011, giving it the highest growth rate in the EU. Estimates for Estonian 2011 GDP expansion range from 6.5% to 8.5%.
Annual GDP growth rate
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Estonia | 14.0% | 6.3% | 6.6% | 7.8% | 6.3% | 8.9% | 10.1% | 7.5% | −3.7% | −14.3% | 2.3% | 8.0% | 3.2% | 4.0% |
| Latvia | 6.1% | 7.3% | 7.2% | 7.6% | 8.9% | 10.1% | 11.2% | 9.6% | −3.3% | −17.7% | −0.3% | 4.5% | 2.5% | 4.0% |
| Lithuania | 3.8% | 6.7% | 6.8% | 10.3% | 7.4% | 7.8% | 7.8% | 9.8% | 2.9% | -14.8% | 1.4% | 6.1% | 3.4% | 3.8% |
| Data from Eurostat (2011 data values are estimates) | ||||||||||||||
GDP per capita
In international dollars, at purchasing power parityPurchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
(PPP). Numbers in brackets show the respective country's GDP per capita as a percentage of the eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
average (also measured at PPP).
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Estonia | 9,909 (40.0%) |
10,935 (42.6%) |
12,044 (46.0%) |
13,284 (49.6%) |
14,882 (53.3%) |
16,618 (57.1%) |
18,819 (59.3%) |
20,584 (61.8%) |
20,259 (59.4%) |
18,386 (56.3%) |
18,266 (56.4%) |
| Latvia | 7,688 (31.1%) |
8,542 (33.3%) |
9,315 (35.6%) |
10,262 (38.3%) |
11,506 (41.2%) |
13,181 (45.3%) |
15,350 (48.3%) |
17,437 (52.4%) |
17,071 (50.1%) |
15,218 (46.6%) |
15,026 (46.4%) |
| Lithuania | 8,437 (34.1%) |
9,257 (36.1%) |
10,088 (38.5%) |
11,410 (42.6%) |
12,622 (45.2%) |
14,218 (48.8%) |
15,922 (50.1%) |
17,907 (53.8%) |
18,946 (55.6%) |
17,315 (53.0%) |
16,973 (52.4%) |
| Data from International Monetary Fund | |||||||||||
See also
Economies of the Baltic Tigers:- Economy of EstoniaEconomy of EstoniaEstonia is a member of the European Union and the eurozone and is an advanced economy, according to the IMF.Before the Second World War Estonia's economy was based on agriculture, but there was a significant knowledge sector and a growing industrial sector, similar to Finland...
- Economy of LatviaEconomy of LatviaUntil the middle of 2008, Latvia had the fastest developing economy in Europe. In 2003, GDP growth was 7.5% and inflation was 2.9%. Unemployment was 9% in 2003 - 2005; however, in 2009 it rose to 23% and is the highest in the European Union. Privatization is mostly complete, except for some of...
- Economy of LithuaniaEconomy of LithuaniaLithuania is a member of the European Union and the biggest economy among three Baltic states. GDP per capita reached USD 17,800 in 2008 and was higher than the ones of all its neighbors – Latvia, Poland, Russia and Belarus....
Other 'Tigers'
- Celtic TigerCeltic TigerCeltic Tiger is a term used to describe the economy of Ireland during a period of rapid economic growth between 1995 and 2007. The expansion underwent a dramatic reversal from 2008, with GDP contracting by 14% and unemployment levels rising to 14% by 2010...
- Four Asian Tigers
- Tatra TigerTatra Tiger"Tatra Tiger" is a nickname that refers to the economy of Slovakia in period 2002 - 2007 and after 2010 following the ascendance of a right-wing coalition in September 2002 which engaged in a program of liberal economic reforms...
- Gulf TigerGulf TigerThe Gulf Tiger or Arab Gulf Tiger is a nickname used to describe the period of rapid economic growth in the city of Dubai. The boom that Dubai has been experiencing since the 1990s is still going on, transforming the city from a desert village to a world class economic hub.- Characteristics :The...