Statistics Estonia said 2025 was the best year for Estonia's economy in the past three years, as the economy returned to growth for the first time since 2022.

However, Estonia's gross domestic product grew by less than 1 percent last year, falling short of analysts' expectations.

Tapver said: "Essentially, that 0.6 percent came from government consumption. Rather, this economic growth shows that money is simply moving from one end of the state to the other within the country. On the one hand, tax revenues increased, including VAT — and that money is used for public investments and to increase government consumption. If we look at the rest of the economy, which should actually be driving growth, it is basically at zero."

While Latvia and Lithuania saw their economies grow by more than 2 percent last year, similar growth is expected to reach Estonia this year.

"This is due to changes in the income tax system, which should leave more money in households' hands and in turn increase consumption. At the same time, we are seeing defense spending rise across Europe, which will likely eventually benefit our exporters as demand for various investment goods increases in other countries," said Kaspar Oja, an economist at the Bank of Estonia.

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