Estonia styled itself as a bridge between East and West, adopting significant economic reforms and technological innovations.

[23] For Estonia, the 2007–2008 financial crisis was easier to weather, because its budget has consistently been kept balanced, and this meant public debt relative to GDP remained the lowest in Europe.

Estonia's commitment to a circular economy, innovation and its success in maintaining a balanced budget, low public debt, and a competitive tax system have positioned it as a model of economic reform and growth in post-Soviet Europe.

In the decades prior to World War I and independence, during the Czarist rule a rather large industrial sector developed in Estonia.

Despite considerable hardship, dislocation, and unemployment, Estonia spent the first decade of independence entirely transforming its economy.

Compensating the German landowners for their holdings, the government confiscated the estates and divided them into small farms, which subsequently formed the basis of Estonian prosperity.

Western European markets were familiar with Estonian dairy, with the main trade partners being Germany and the UK; only 3% of commerce was with the neighbouring USSR.

The USSR's forcible annexation of Estonia in 1940 and the ensuing Nazi and Soviet destruction during World War II crippled the Estonian economy.

Post-war Soviet occupation and Sovietisation of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure.

Moscow expanded on those Estonian industries which had locally available raw materials, such as oil shale mining and phosphorites.

Estonia styled itself as a bridge between East and West, adopting significant economic reforms and technological innovations.

[22] In early 1992, both liquidity problems and structural weakness stemming from the communist era precipitated a banking crisis.

As a result, effective bankruptcy legislation was enacted and privately owned; well-managed banks emerged as market leaders.

[citation needed] The financial crisis of 2007–2008 had a deep effect on the economy, primarily as a result of an investment and consumption slump, that followed the burst of the real estate market bubble that had been building up.

In response to the crisis, the Ansip government opted for fiscal consolidation and retrenchment by maintaining fiscal discipline and a balanced budget in combination with austerity packages: The government increased taxes, and reduced public spending by slashing expenditures and public salaries across the board.

[31] Estonia was one of the five worst-performing economies in the world in terms of annual growth,[32] and had one of the hightest rates of unemployment in the EU, which rose from 4% in May 2008 to 16% in May 2009.

[36] Estonia's journey towards the euro took longer than originally projected, owing to the inflation rate continually being above the required 3% before 2010,[37] which prevented the country from fulfilling the entry criteria.

Among various factors, S&P cited as contributing to its decision was confidence in Estonia's ability to "sustain strong economic growth.

[citation needed] A balanced budget, almost non-existent public debt, flat-rate income tax, free trade regime, adoption of the euro, competitive commercial banking sector, hospitable environment for foreign investment, innovative e-Services and mobile-based services are hallmarks of Estonia's free-market-based economy.

[citation needed] The privatisation of state-owned firms is virtually complete, with only the port and main power plants remaining in government hands.

[citation needed] The constitution requires a balanced budget,[47] and the protection afforded by Estonia's intellectual property laws is similar to that of the EU.

This allows companies that reinvest their profits into development to avoid tax obligations and allocate more funds for growth and expansion.

[56] According to the Ministry of Environment, Estonia committed to developing a circular economy strategic document and action plan by 2021.

The late-2000s recession in the world, the near-concurrent local property bust with changes in Estonian legislation to increase labour market flexibility (making it easier for companies to lay off workers) saw Estonia's unemployment rate shoot up to 18.8% throughout the duration of the crisis, then stabilise to 13.8% by summer 2011, as the economy recovered on the basis of strong exports.

Estonia has a strong information technology (IT) sector, partly due to the Tiigrihüpe project undertaken in mid-1990s, and has been mentioned as the most "wired" and advanced country in Europe in the terms of e-government.

Mined commodities include oil shale, peat, and industrial minerals, such as clays, limestone, sand and gravel.

According to Estonian Institute of Economic Research, the largest contributors to GDP growth in 2005 were processing industry, financial intermediation, retailing and wholesale trade, transport and communications.

5 major cargo ports offer easy navigational access, deep waters, and good ice conditions.

Lennart Meri Tallinn Airport is the largest airport in Estonia, with 1,73 million passengers and 22,764 tons of cargo (annual cargo growth 119.7%) in 2007. International flight companies such as SAS, Finnair, Lufthansa, EasyJet, and Nordic Aviation Group provide direct flights to 27 destinations.