“The Estonian general election took place in March this year, and we are finally able to see the results,” says Martin Simovart, Partner at Cobalt in Estonia. “Politics in Estonia is now quite a mess. The new government is a populist coalition – this means that the situation is unstable and a polarized sentiment has been created.”
That does not seem to affect the general economic situation in Estonia, however, which remains strong. “The economy is quite stable,” Simovart says, “as we see a relative stability in investment. Clients are not affected by the current political situation, and we haven’t noticed any major changes. However, uncertainty exists, and this might change in the future.”
“At this point, our GDP is stable, and somewhere around 4.1%,” he says. “But growth is not as great as it used to be. We can’t be sure if general uncertainty caused that slowing down, but we might see it slow even more in the upcoming period.”
Still, he says, the M&A market – which he describes as being “incredibly lively” in 2018 – is “still pretty busy.”
Simovart sounds fairly cynical about government proposals for infrastructure development in the country. “In terms of projects taking place,” he says, “we see that the government has promised a few new railway and road connections – but it is very hard to tell if and when anything they promised will actually turn out to be true.”
Still, Simovart acknowledges that recent legislative developments are encouraging. “There have been recent initiatives to change the Commercial Law,” he says, “although we are still waiting for that to be finalized. Once done, these changes will assure freedom of entrepreneurship, which is a great initiative.” And there’s more. “A large amount of regulations are also coming as a mandatory legislative change from the EU,” he says. “Those mostly involve climate and sustainability regulations, as well as financial regulatory regulations which are a growing trend within the Union.”
Simovart says that he would not welcome the government's proposed change to the Estonian pension system, which he describes as "short-sighted -- and although it may in the short term boost the GDP, in the long run it is damaging for the pension funds, investors, and the country's sustainability to deal with pension payments in the future."
Otherwise, he says, he hopes for “a better government in the future, one that would be forward-looking, and one that doesn’t create more mess, but resolves the existing one.”
