A combination of key policies, including commitment to privatization, adoption of an independent currency, establishment of an extremely open trading regime, and successful attraction of foreign investment, have made Estonia one of the success stories of the region. As a result, Estonia was one of five Central European countries recently invited by the European Union for membership talks. Today, Estonia continues to experience strong growth after its economy bottomed out from post-Soviet shocks in the second quarter of 1993. Estonia's GDP growth in 1995 was 4.3 percent and in 1996 it was 4 percent. The economy is predicted to grow between 5 and 7 percent.
Inflation continues to drop, following the trend of the past two years.
In 1996, inflation fell to under 15 percent, and it is predicted to drop to 12 percent in 1997. The Estonian currency, the Kroon, is stable and has been pegged to the German Mark at the rate of 8 Kroons to 1 Mark since its introduction in 1992. In 1992, with the assistance of the IMF and other international institutions, Lithuania adopted a program to restrain inflation, reduce price controls, lower the budget deficit, and privatize the economy. After three years of GDP decline, the country experience its first post-Soviet positive GDP growth rate in 1994, and posted a 2 percent growth rate in 1995. Despite government budgetary problems and a banking crisis in the winter of 1995-1996, GDP grew by 3.6 percent in 1996.