Th, 1.06.2023
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Estonia richer by fifth thanks to EU

Oliver Kund
, reporter
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Photo: Toomas Huik / Postimees

Since joining European Union in 2004, the topmost winners are Latvia, Poland and Estonia. This is the conclusion arrived at, in April, by economists Nauro Campos, Fabrizio Coricelli and Luigi Moretti, using a method comparing actual gross domestic products per person with indicators in case not joining EU in said year.

To calculate that, the scientists created a counterpart for each country not belonging to EL. The way «counterpart GDP» differed shows how the countries would have fared, had they not joined. The hypothetical Estonian economy was created as a combination of economies of Croatia (69 percent), China (14 percent), Colombia (8 percent), Chile (7 percent), and Turkey (2 percent).

The economists found that in Estonia’s case, the effect of expectancy applied: our economic growth got a boost in 1997 i.e. a year before the EU association agreement was signed.

The decade’s (1998–2008) actual average GDP per person was larger by a fifth than that of a hypothetical Estonia which wasn’t a member. Of those joining at the same time, only Latvia and Poland are ahead of Estonia by that figure, with 53 and 23 percent respectively. Czech Republic, Slovakia and Slovenia have benefited much less.

The same benefit category with Estonia was shared by Denmark and the UK which joined the European Community in 1973. Surprisingly, the comparisons revealed only Greece which joined in 1981 has lost out: outside of the EU, its GDP per person would have been bigger by 15 percent. One of the authors, Prof Coricelli of Paris School of Economics, said the analysis was intentionally done till 2008 only. As the states have not yet fully recovered from the economic crisis, the last five years are not included in the analysis.

Prof Coricelli claimed that by now, the GDP difference between Estonia and the hypothetical non-EU counterpart will probably have grown – as shown by the fate of Croatia which is struggling much more than Estonia to recover from the economic crisis.

According to the professor, the main growth engine for EU member states has been the single market; but the differences between the states have emerged by skills in using money. «Financial development is a main variable, explaining why some states benefited more than the others. Estonia fits well into the picture, having been able to reap good benefits from joining the EU,» stated Prof Coricelli.

According to Eesti Pank economist Andres Saarniit, the analysis by scientists firstly points to the developmental edge derived from being in the EU. «An average employed Estonian household has, thanks to EU membership, arrived at the current income and consumption habits a couple of years earlier.»

What state would Estonia be in now, had it not joined the EU ion 2004? «Perhaps, the most illustrative mental experiment would be subtracting 10–15 percent of our current income,» offered Mr Saarniit, considering that the average growth bonus of states that joined in 2004 was 12 percent according to the study.

According to finance ministry fiscal policy chief Andrus Säälik, the initial positive effects started to appear while the ministry was still thinking about signing the association agreement.

In a 2001 analysis by fifteen Estonian experts it was predicted that if Estonia enters the EU, its GDP per person will increase by 5 to 6 percent a year, during 2004–2010. Without joining the EU, it would have been about four percent. In reality, the economy grew 7–10 percent during that time.

«The aha! moment was, perhaps, that all of these impulses turned out to be stronger than we thought. Especially starting the third quarter of 2005, when the real estate boom hit, till the start of 2007 when we obviously overdid it,» recalled Mr Säälik.

At his assessment, the main key to success is the EU thought patterns we have embraced, helping to pursue a more prudent economic policy. Also, the competitive pressure of belonging to the EU forced enterprises to develop. Had Estonia not joined the EU, a rather isolated economic policy would probably have resulted; or else Estonia had joined some other economic community.

As on May 1st it will be ten years since Estonian joined the European Union, Eesti Pank analysts are also calculating the benefits of being a member – to present their findings during the second week of May.

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