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This paper discusses options for removing the remaining barriers that impede worker reallocation across jobs, sectors, and regions into more productive activities.
Estonia grew faster than most emerging market economies during 2000-07, but it is now in a severe recession due to a collapse of domestic demand in the wake of the international financial crisis.
Country Notes from OECD Economic Policy Reforms: Going for growth 2011 presenting OECD recommendations for structural reform priorities for individual countries.
Estonia is particularly well regarded in ICT network readiness and well-functioning e-government. However, the share of production in high tech and knowledge intensive sectors is relatively low.
More flexible labour markets will be a key adjustment mechanism in the current recession as well as in the medium term if Estonia is to become a knowledge-based economy.
Estonia is facing its most challenging economic situation since the early 1990s. Past overexpansion was financed by rapid credit growth. Growth was in general biased towards domestic demand.
Co-operation is required between regional financial supervisory authorities to mitigate risks to financial stability as well as cyclical volatility in housing and construction. Financial stability could be strengthened by increasing households’ financial literacy.
The key challenge is to develop gradually its counter-cyclical role without jeopardizing sustainability.