Analysing Macroeconomic Objectives: Creating a Comprehensive Country Fact File

Research Question:
How do various macroeconomic indicators reflect a country's performance in achieving its economic
objectives, and what implications do these indicators have on policy-making and economic stability?

Research Task:
You are tasked with creating a comprehensive country fact file that thoroughly examines the
macroeconomic indicators and policies of a selected country. The objective is to assess the country's
performance in achieving its macroeconomic objectives and to analyse the implications for
policymakers. Your analysis should encompass a wide range of macroeconomic indicators, including
but not limited to GDP growth rate, inflation rate, unemployment rate, balance of payments, fiscal
deficit, and exchange rate stability.

Instructions:
1. Select a country of your choice and gather relevant data on its macroeconomic indicators. You
may refer to reputable sources such as the World Bank, International Monetary Fund (IMF), or the
country's official statistical agencies.

ESTONIA

GDP (gross domestic product) 37.19 billion (2021)

GNI (gross national income) 55.26 billion PPP dollars (2021)
GDP per capita 27,943.70 USD (2021)
GNI per capita 41,520 PPP dollars (2021)
GDP growth rate: 8% annual change (2021)
Government debt: 8.4% of GDP (2019)

2. Provide a brief overview of the country's economic structure, including its main sectors, trade
partners, and any significant economic events or policy changes that have occurred in recent years.

Exports: 18,2 billion (2023)

Top exports: cars (€895M), communication equipment (€883M), electricity (€433M), prefabricated
buildings (€429M), and refined petroleum products (€418M).

Top export destinations: Finland (€3.07B), Latvia (€2.16B), Sweden (€1.7B), Lithuania (€1.49), and
Germany (€1.2B).

Imports: 21,2 billion (2023)

Top imports: cars (€1.56B), refined petroleum products (€961), electricity (€741), communication
equipment (€713M), and packaged medication (€596).

Top import destinations: Finland (€3.29B), Germany (€2.47B), Latvia (€2.32B), Lithuania (€2.18), and
Sweden (€1.63B).

Significant economic events: COVID-19 recession, Russian invasion of Ukraine (fall in GDP of 1.3%),
high inflation which hit 24.2% in 2022
3. Analyse the country's performance in achieving the following macroeconomic objectives:

- Economic Growth: Evaluate the country's GDP growth rate trends over the past few years and
identify key factors driving growth or hindering it.
Estonian GDP was growing steadily until 2020 due to the COVID-19 recession and then in 2022 the
Russian invasion of Ukraine. 2024 predictions show again an approximate GDP growth of 3.5%. Main
reasons behind growth are technological innovations and a growing market of cars.

- Price Stability: Examine the inflation rate trends and assess the effectiveness of monetary policy
in controlling inflationary pressures.
Before 2021, the inflation rate was around 1.5-2%, then rose to 25% by the middle of 2022, which
was again due to COVID-19 and effect of the Russian invasion of Ukraine. Today, inflation has
decreased back to around 5%, which is still quite high. Monetary policy has been quite effective in
controlling inflationary pressure, but there is only so much policy can do.

- Full Employment: Analyse the unemployment rate and assess the degree of labour market slack,
identifying any structural or cyclical factors contributing to unemployment.
The average unemployment rate has been around 5%, there can be seen factors such as military
service for men around age 18-21 and pregnancy for women around the age of 25-30. Labor market
slack is low as jobs are competitive and there is a large amount of application for most positions.

- External Balance: Assess the country's balance of payments position, including trade balance,
current account balance, and foreign exchange reserves.
Trade deficit is around 4 billion dollars, Estonia does not make many things itself so import is
popular. Account balance was around 0.5-2 billion before COVID-19 and Russian invasion, since then
it has been decreasing, today it is -3.2 billion. Foreign exchange reserves have been around 1.8
billion, or 5% of GDP.

- Fiscal Sustainability: Evaluate the country's fiscal policy stance, including government revenue,
expenditure, and the level of public debt.
The tax-to-GDP ratio is around 33%, government has usually been in relatively low deficit, which has
increased recently due to world events. Public debt is very low, but national debt is around 7 billion.

- Exchange Rate Stability: Analyse the stability of the country's exchange rate and assess its
implications for international trade and capital flows.

4. Identify any trade-offs or conflicts among the macroeconomic objectives and discuss the policy
implications for policymakers. Consider how policymakers could use various macroeconomic
policies, such as monetary policy, fiscal policy, and supply-side policies, to address any challenges or
achieve specific objectives.

5. Provide recommendations for policymakers based on your analysis, outlining potential policy
adjustments or reforms that could help improve the country's macroeconomic performance and
achieve its economic objectives more effectively.

6. Ensure that your fact file is well-organized, supported by relevant data and charts, and
demonstrates a thorough understanding of macroeconomic principles and their real-world
application.

This research task is expected to take approximately one hour to complete, including data gathering,
analysis, and writing. Make sure to cite all sources used in your research.