Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Republic of Estonia (long-term local- and foreign-currency issuer and senior unsecured debt ratings: A+/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 3 February 2026.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

Estonia’s A+ credit ratings are supported by several credit strengths, including: i) its robust institutional set-up, anchored by euro-area and NATO memberships, alongside a solid track record of policy continuity and responsiveness, which underpin a robust framework for macroeconomic policymaking while partly offsetting external risks; ii) prudent fiscal policies and conservative debt management that have resulted in the country having one of the lowest debt-to-GDP ratios globally, backed by high financial reserves; and iii) a favourable medium-term economic growth outlook, supported by sizable EU-fund allocations, which should support a resumption of the pre-crisis convergence trend towards euro area income levels and improvements in economic resilience.

The main challenges to the ratings are: i) exposure to external shocks, given the Estonian economy’s small size, still comparatively moderate income levels, elevated openness, and geographic proximity to Russia; and ii) adverse demographic trends and high defence spending commitments that add significant pressures to the fiscal trajectory.

After contracting by 0.3% in 2024, Estonia’s economy entered a gradual recovery phase in 2025, with real GDP growth reaching 0.5%. Wage growth, which has outpaced inflation, is supporting disposable income and household spending, though fragile confidence and a VAT increase in July 2025 have tempered the pace of the recovery in consumption. Investment is set to remain a key growth driver, underpinned by lower borrowing costs, stronger corporate lending, and a ramp-up in public investment - particularly through EU-funded projects and large infrastructure initiatives. Growth is expected to strengthen over the medium term, with real GDP projected to accelerate to 2.5% and 3.0% in 2026 and 2027 respectively, supported by stronger private consumption, supportive tax reforms, and a rebound in exports as Nordic construction and real estate markets recover.

The general government deficit narrowed to 1.3% of GDP in 2025, primarily due to higher personal and corporate income tax rates, a VAT increase, the introduction of a motor-vehicle tax, alongside improving economic momentum. However, the deficit is forecast to widen sharply to 4.2% of GDP in 2026, driven by the shift to a universal tax-exemption system, higher income thresholds, and a significant rise in defence spending (from 3.5% of GDP in 2024 to a target of 5.4% in 2026). Government investment is expected to peak in 2026, with large security-related and transportation projects (both nationally and EU co-financed) gaining momentum. Without policy changes, the deficit is projected to remain at 4.2% of GDP in 2027 before gradually narrowing to around 3.0% by 2030. As a result of sustained deficits, public debt is projected to rise from 23.5% of GDP in 2024 to approximately 36% by the end of 2030.

The Stable Outlook reflects Scope’s view that the risks Estonia faces over the next 12 to 18 months are balanced.

Upside scenarios for the ratings and Outlooks are (individually or collectively):

1. Structural reforms and investment continued to sustain income convergence;
    
2. The public debt-to-GDP ratio remains anchored at low levels, supported by declining general government deficits over the medium run; and/or
    
3. Strengthened resilience to external shocks, including geopolitical risks.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

1. Geopolitical risks increased, undermining macroeconomic stability;
    
2. The fiscal outlook worsened, leading the debt-to-GDP ratio to rise significantly above its presently-forecasted trend;
    
3. Macroeconomic imbalances increased materially, leading to a significant deterioration in growth prospects; and/or
    
4. External and/or financial sector vulnerabilities increased substantially.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Brian Marly, Senior Analyst

© 2026 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.