GDP growth has been faster than what was reported before

GDP data magic

• GDP growth has been faster than what was reported before
• But growth is still unbalanced …
• … and downside risks prevail

GDP growth has been faster than what was reported before
Economic growth in Estonia looks much stronger in the first half of this year after the substantial data revisions by the Statistical Office this September. There was no decline in economic activity in the first quarter as was reported earlier. According to the revised data, GDP growth accelerated from 0.3% in the first quarter to 2.4% in the second quarter. Higher GDP growth is more in line with other economic indicators, i.e., the fast growth in wages, retail sales, and real estate prices.

But growth is still unbalanced and therefore unsustainable …
In the second quarter of this year, economic growth was still too dependent on private consumption. Investments grew modestly. The growth of exports remained small, affected by weak external demand and increased geopolitical tensions. In a tiny, open economy like Estonia, consumption-based growth cannot continue for long, if exports and investments do not pick up.

… and downside risks prevail
As the economic growth rate of Estonia for the first half of the year was lifted considerably, analysts might consider revising their forecasts upwards later this year. At the same time, negative external risks have clearly grown. The Russia-Ukraine conflict and new round(s) of sanctions from both sides have increased the instability in the region and will dampen trade and investment flows.

Source: Swedbank

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African swine fever found in Estonian wild pig

A carcass of a wild pig that died of African swine fever, an animal disease that poses a severe threat to pork producers, was found in southern Estonia last week, government veterinary officials confirmed today.

“The infected dead wild pig was found six kilometers from the Latvian border. No domesticated animal has been diagnosed with the disease yet,” said Veterinary and Food Board director general Ago Pärtel in a statement. He reiterated calls for strict measures to keep the situation that way.

Wild pigs with the disease were found in Latvia earlier in the summer, and the virus is believed to have been present on the Estonian side of the border already earlier.

The disease in the Estonian pig was diagnosed by a EU lab in Spain.

There are 15 pig farming enterprises within an eight-kilometer radius of the carcass, which was found in Hummuli in southern Estonia. Partel has established additional strict measures on slaughter and movement of animals for these farms.

Agriculture Minister Ivari Padar said in a media statement: “Restrictions are likely on the way for export of live pigs. These do not impact meat and meat products.”

Source: ERR News

The ban of quick loan advertising is big loss for media

A plan by the Ministry of Economic Affairs to ban quick and payday loan advertising on television and radio would cost the stations roughly 3.6 million euros, said the Association of Estonian Broadcasters.

Toomas Vara, the head of the association, told Eesti Päevaleht the plan would have an unproportionally large financial effect.

“Banning ads on a legal activity is crazy, instead of regulating the accessibility of loans and measures of fast loan companies,” he said.

Tea Danilov said the bill would infringe on the principle of a free economy, but would benefit consumers.

The bill could be discussed by the government already this week.

Source: ERR News

The cost of Russian import ban

The Estonian Institute of Economic Research has put a number on last month’s Russian ban on the import of food products, fish, meat, and fruit and vegetables from EU nations.

The direct loss is only 75 million euros, the sum of the banned products exported to Russia annually, while that figure doubles as many raw ingredients are exported to neighboring countries, which would have been processed and sent to Russia.

Cheese manufacturers are suffering the most, with their losses calculated at 27 million euros. Raw fish and fish products make up 15 million euros annually in exports to the eastern neighbor, with milk and dairy products in a similar bracket.

Losses from indirect exports to Russia are hitting the dairy industry the hardest.

Marje Josing, the head of the institute, said the figures are food for thought for companies which have failed to diversify markets, adding that businesses have played safe in comfortable schemes of selling raw material, instead of adding value or trying to crack Scandinavian or German markets.

She said looking at the bigger picture, the food industry is growing in the world, and demand is increasing.

Source: ERR News

Estonian companies buying airtime in pro-Kremlin media

Some 150 Estonian enterprises and organizations, including Health Sickness Fund, are advertising their products in pro-Kremlin state media channels such as RTR Rossija which is also available in Estonia, writes Äripäev.

One of the largest advertisers was the Estonian Health Insurance Fund, a state organization. Such advertising is politically tricky because the ads are aired near Vesti, the station’s news programme that broadcasts Moscow’s official views.

Read more from BBN

The current account deficit replaced by a surplus in 2Q

Economic growth in Estonia in the second quarter was expected to be based primarily on domestic demand. Growth based on domestic demand has generally meant for Estonia a larger or smaller current account deficit. Given that, the small surplus in the second quarter of around 1% of GDP of the quarter was somewhat surprising. The cause of the surplus is the surplus on the foreign trade account, while the net outflows of primary and secondary income pushed the balance rather towards deficit. For GDP growth this means more balanced growth than had been expected, as the contribution from net exports was positive for a long time.

Exports of services saw relatively robust growth from the levels of the previous quarter and of the same quarter of last year. Imports of services grew little during the quarter and the surplus on the services account increased to 8.7% of GDP in the second quarter. Both the imports and exports of goods fell again, and the deficit on the goods account stood at 4.9% of GDP, which was lower than the average for 2013. The continuing fall in goods imports since the third quarter of last year can partly be explained by weak investment activity.

The question arises again of whether the moderate deficit on the current account in recent years was more a consequence of low levels of investment activity or of structural changes and less capital-intensive growth.

See also: The Estonian balance of payments, international investment position and gross external debt for the second quarter 2014

Source: Bank of Estonia

Author: Andres Saarniit, Economist at Eesti Pank

440,000 tourists stayed in Estonian hotels in July

According to Statistics Estonia, 440,000 tourists stayed in accommodation establishments in July, which is 4% more than in the same month of the previous year. The number of both domestic and foreign tourists increased.

In July, 292,000 foreign tourists stayed in accommodation establishments – this is 3% more than in July of the previous year. Foreign tourists continue to account for two thirds of the total number of tourists. 63% of the foreign tourists arrived from the neighbouring countries Finland, Russia and Latvia. The number of tourists from Russia staying in accommodation establishments was 5% smaller than in July of the previous year, while the number of tourists from Latvia and Finland rose by 2% and 1%, respectively. Compared to July 2013, there was an increase in the number of tourists from several European countries – Germany (8% more), Sweden (13% more) and the United Kingdom (13% more). However, the number of accommodated tourists from Lithuania, Spain, Italy and Norway was smaller than in July 2013. The number of tourists arriving from Asian countries continues to increase. In July, the number of accommodated tourists from the United States also grew by a fifth. 63% of the foreign tourists who used the services of accommodation establishments stayed in the accommodation establishments of Tallinn. The next most popular destinations were Pärnu, Tartu and Saare county accounting for 14%, 6% and 5% of all accommodated foreign tourists, respectively.

80% of the foreign tourists were on a holiday trip and 14% were on a business trip.

In July, 148,000 domestic tourists stayed in accommodation establishments, which is over 11,000 domestic tourists more than in July of the previous year. A fifth of the accommodated domestic tourists stayed in Harju county, 15% in Pärnu county and 10% in Saare county.

70% of the domestic tourists were on a holiday trip and 15% were on a business trip.

In July, 1,304 accommodation establishments offered services for tourists. 23,000 rooms and 55,000 beds were available for tourists. So many rooms and beds have not been available for tourists in any previous year. In July the room occupancy rate was 58% and the bed occupancy rate was 50%. The room occupancy rate was higher in Tallinn and Pärnu (84% and 81%, respectively). The average cost of a guest night was 34 euros, which is two euros higher than in July 2013. The average cost of a guest night in Tallinn and in Pärnu was higher than the country’s average.

Accommodation by region, July 2014
Accommodation Total Northern
Estonia
North-Eastern
Estonia
Central
Estonia
Western
Estonia
Southern
Estonia
Accommodation establishments 1 304 215 71 126 494 398
Rooms 22 641 8 313 1 608 1 573 6 458 4 689
Beds 55 025 18 943 3 651 4 013 16 059 12 359
Room occupancy rate, % 58 77 46 32 54 40
Bed occupancy rate, % 50 66 44 29 49 35
Tourists accommodated 440 056 217 410 22 238 20 981 113 399 66 028
Nights spent 854 806 388 557 49 274 36 125 245 109 135 741
residents of Estonia 283 906 49 324 27 452 23 830 93 880 89 420
foreign visitors 570 900 339 233 21 822 12 295 151 229 46 321
Average cost of a guest night, euros 34 40 28 25 33 22

Source: Statistics Estonia

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