Nordea, the financial services group, is predicting 1.7 percent economic growth for Estonia this year and 2.2 percent for 2015.
The effect of the Russia-Ukraine crisis on the Estonian economy has been modest so far, said Nordea's chief economist Tõnu Palm, but the recovery of Estonia's main export markets will stall in 2015 due to geopolitical risks.
The value of exports to Russia declined by 9 percent over the past 9 months, the dairy industry being the worst off.
Eurozone growth will also be small, so Estonian companies will have to be prepared to locate and enter new markets, Nordea's report said.
Wages are expected to rise. The strain put on the economy by negative demographic trends can be alleviated by increasing the employment rate, mainly by ensuring greater involvement of younger and older workers.
In contrast to a large country like Germany, for example, Estonia has the potential to increase the employment rate by 4-5 percent.
"The key factors in maintaining Estonia's faster rate of economic growth over the next decade are investments to human resources and export potential," Palm said. "The forthcoming general elections in spring 2015 will most probably lead to tax reduction for low-income workers and the labor force more generally. It is time to put in extra investments to human capital, in order to increase welfare and limit emigration."
In June, had downgraded its growth prediction for Estonia to 1.2 percent, from the 2.8 percent growth rate it had predicted in March.