The Estonian Economy - Business sector digitalisation and automation: opportunities and challenges

Business sector digitalisation: opportunities and challenges

  • Estonia has been in the forefront of e-Government solutions, but integration of innovative digital technologies in the business sector is still below the European Union average.
  • Estonian manufacturing robot density is well below the average of the European Union and the rest of the world. About one-fifth of the work processes in the manufacturing industry are automated.
  • Companies’ investments in machinery, computer software, and R&D make up about 39% of total investments. Although this share has been growing in recent years, the share of companies’ total investments in GDP is on a downward trend, which has a negative impact on the growth of productivity-raising capital.

In the post-crisis period, rapidly growing labour costs have been outpacing labour productivity growth, which has contributed to enterprises’ waning profitability and competitiveness. The scarcity of labour has become an important factor limiting businesses. In the future, the ageing population and diminishing labour force will hamper output growth and increase the need for productivity growth. Technological change and innovation can be key for boosting productivity growth and achieving sustainable economic growth. However, an important prerequisite for enterprises’ higher investments and productivity growth is higher demand, in our small and open economy–foreign demand.

Estonia is among the global leaders in digitalisation, especially in terms of e-Government solutions. However, the digitalisation and automation of the business sector is still lagging the rest of the European countries. One of the weaknesses in this case is Estonian business sector demography as majority or more than 90% of enterprises are small companies with fewer than 10 employees. These enterprises may lack employees with technical skills and may face financial barriers to investing in new technologies and innovation. In line with investments in automation and digitalisation, there is a greater need to invest in the digital skills and competences of employees, while educational system should also support more higher technological qualification. According to Swedbank’s Industrial Survey, Estonian manufacturing companies see the shortage of labour with appropriate skills as one of the main factors restraining automation and digitalisation.

PDF-Document Full analysis: Business sector digitalisation and automation: opportunities and challenges

For more information please contact Ms. Marianna Rõbinskaja, +372 888 7925, marianna.robinskaja@swedbank.ee

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