What is a Baltic Tiger
Baltic tiger is a colloquial term that refers to any one of the three Baltic nations of Lithuania, Latvia and Estonia, particularly in reference to their double-digit economic growth rates from 2000 to 2007.
The Baltic tigers achieved independence in the early 1990s, following the breakup of the Soviet Union. Once independent, each embarked on an aggressive program of economic reforms and liberalization, leading to significant inflows of foreign investment.
Today, the growth of these countries’ economies has slowed. However, according to the Central European Financial Observer, the former tigers still have healthy, stable economies, with Estonia’s being the strongest of the three.
BREAKING DOWN Baltic Tiger
The Baltic Tigers share a number of attributes common to tiger economies in other parts of the world. These attributes include an open economy, a highly-skilled workforce and relatively low wages.
After the collapse of the Soviet Union, each of the Baltic states had a large budget deficit. The International Monetary Fund stepped in and each of the states set about privatizing industries previously run by the government while increasing tax collection.In Lithuania, government spending went from 38 percent of the GDP to 32 percent in just three years. During the same period of time, the country’s budget deficit went from 8.5 percent of its GDP to only 1.2 percent of it.
The combination of reforms and investment resulted in these nations recording the highest growth rates in all of Europe between 2000 and 2007. In 2003, The Economist noted Lithuania had the highest growth rate in Europe the previous year, with “booming exports, zero inflation, a rock-steady currency, shrinking unemployment and a budget surplus.” During this time, Latvia’s economy grew at a rate of 11.9 percent, the highest rate of the three.
Remaining Stable After the Crisis
The credit crisis of 2008-2009 hit the Baltic Tigers hard. The GDP of each country contracted by more than 14 percent in 2009.
Facing severe recessions, the Baltic tigers each implemented severe austerity measures. These policies helped keep the three countries’ economies stable and their national deficits low, even as other economies around the world suffered.
As of 2016, the economies of the Baltic states continued to grow at a slower rate than the average for other Eurozone countries. However, even with sluggish growth, these countries are positioned to withstand future external shocks, thanks in part to their low public debt.