In January, there will (I think) be just one country that is not just a member of:
- euro zone and
- NATO but also meets those clubs' rules (spending 2% of GDP on defence, and meeting the common currency zone's budget deficit, debt and inflation criteria).
It's Estonia (I have tried to check this but the Economist's brilliant research department does not work at weekends so I am not completely certain).
That's not exactly new though I may be the first person to have spotted it. But what is new is the astonishing recovery in the Estonian economy. I know that month-by-month industrial production figures can be misleading, but these figures are truly startling. Industrial production up 31.1% year on year (compared with a mere 21.7% in August). Exports of manufactured goods were up 54% (against an August figure of 41%). GDP growth this year. As this chart shows, much of the ground lost during the recession has already been caught up.
The volume index and trend of production in manufacturing, January 2000 – September 2010 (2005 = 100)
All that looks pretty good for the government of Andrus Ansip, especially if unemployment starts to go down too. But what about the future. Here is a note of caution from Swedbank
While this year – and maybe in the first half of 2011 – exports will grow, due to expansion of cheap production, we foresee another structural shift coming as costs inflate and force low-cost producers to stop production or shift to higher-priced products. We also see that companies now rapidly expanding their production will soon face capacity constraints – similar to the ones seen during the crisis, when too few investments were made – and existing capacities will soon be fully exhausted. These developments, together with slowed growth in Estonia’s main export markets, will affect Estonian production and export growth rates, which will slow substantially in 2011. However, we expect a recovery of growth rates at the end of 2011, when external demand is expected to pick up and some of the capacity constraints are alleviated through growing investments.