Tips for foreigners moving to Estonia

For everyone who have already arrived to Estonia or planning to move here – there is new guideline available with everything you might need, from services, utilities, healthcare and education to buying/renting property and requirements if you want to take your pet(s) with you.  Read here

The construction price index took an upturn

According to Statistics Estonia, in the 3rd quarter of 2014, the construction price index changed 0.3% compared to the 2nd quarter of 2014 and -0.2% compared to the 3rd quarter of 2013.

Compared to the previous quarter, the construction price index was on the rise again after a two-quarter decline, but still remained below the level of the third quarter of the previous year.

In the 3rd quarter, compared to the same quarter of the previous year, the construction price index was primarily influenced by a decline in the price of materials, which accounted for three-quarters of the total decline of the index.

Compared to the previous quarter, the costs of building materials increased by 0.4%. The costs of building machines increased by 0.1% and labour costs rose by 0.2%.

In the 3rd quarter of 2014, the percentage change of the repair and reconstruction work price index was 0.5% compared to the 2nd quarter of 2014 and -0.1% compared to the 3rd quarter of 2013.

The calculation of the construction price index covers four groups of buildings: detached houses, blocks of flats, industrial buildings and office buildings. The repair and reconstruction work price index covers office buildings. The construction price index expresses the change in the expenditures on construction taking into consideration the price changes of three basic inputs: labour force, building materials and building machines.

Change in the construction price index, 3rd quarter 2014
2ndt quarter 2014 –
3rd quarter 2014, %
3rd quarter 2013 –
3rd quarter 2014, %
TOTAL 0.3 -0.2
labour force 0.2 0.4
building machines 0.1 3.0
building materials 0.4 -0.8
Index of detached houses 0.4 -0.5
Index of blocks of flats 0.0 -0.6
Index of industrial buildings -0.1 -0.1
Index of office buildings 0.6 -0.1
Change in the repair and reconstruction work price index, 3rd quarter 2014
2nd quarter 2014 –
3rd quarter 2014, %
3rd quarter 2013 –
3rd quarter 2014, %
TOTAL 0.5 -0.1
labour force 0.6 0.9
building machines -0.2 4.1
building materials 0.5 -0.8

Source: Statistics Estonia

Corporate borrowing has increased somewhat

Corporate debt was 3.3% larger at the end of the second quarter than it was a year earlier. Both domestic and foreign debt liabilities increased by about the same amount and long-term debt liabilities for financing investment increased the most. Corporate debt has not changed much in relation to GDP in recent quarters, as debt liabilities and nominal GDP have grown at similar rates.

Corporate equity grew more slowly in response to lower profitability. The rapid fall of recent years in the ratio of debt to equity, which shows corporate financial leverage, came to a stop. The debt burden and financial leverage of the Estonian corporate sector have fallen a relatively long way in recent years compared to those in other European Union countries, and both indicators are lower than the EU average.

Household financial assets and incomes are continuing to grow faster than debt liabilities. Although the slower growth in the economy and in incomes has led growth in household financial assets to slow too, it remained quite fast and stood at 7% year-on-year at the end of the second quarter. Within that, household deposits and cash increased by some 8%. The growth in household debt liabilities has gradually accelerated, but it still remains slow and stood at 1.5% at the end of the second quarter.

Moderate borrowing and determined saving by households meant that the Estonian economy as a whole was a net lender in the second quarter of 2014. This means that more funds were invested abroad or returned there than were taken in from abroad.

Financial account statistics can be found on the Eesti Pank website:

Source: Bank of Estonia

Author: Taavi Raudsaar, Financial Sector Policy Division of Eesti Pank

The labour market has not adjusted to the weaker economic environment

Labour costs increased a little more slowly in the first half of 2014 than they had earlier, but still notably faster than the total value added created in the economy. There are several reasons why the rapid growth in labour costs in companies has not yet stopped. One is that there is no sense in companies reducing their numbers of employees if they expect demand to recover, because then they will need to hire new employees, which is costly. As the euro-area economy continues to grow slowly and several of Estonia’s main trading partners are struggling economically, the ability of companies to raise their profitability given the high labour costs will depend on whether they manage to find export orders from rapidly growing markets or to increase their market share there.

Any reduction in the speed of wage growth is being hampered by labour shortages. This is pushing companies to compete for labour much more than before with both local and foreign employers. The shrinking supply of labour and the ease with which workers can go abroad to find a job have made recruitment ever more difficult. Current employees may thus be retained to hedge against staffing risks, though if this continues for a long time at the expense of profits it will increase the vulnerability of companies.

The first signs appeared in the first half of this year that labour costs may have begun to adjust to the weakness in economic activity that has reigned for a long time. Data from the Labour Force Survey show that employment and hours worked per employee both fell slightly, while wage growth slowed in the second quarter. The adjustment has still been modest in scope though.

The decline in the working age population will affect the labour supply over the long term. The number of people of working age fell last year by 0.9%, mainly because of natural demographic processes like the fall in the number of young people. In the coming years, the small birth cohorts of the 1990s will be finishing their higher education studies and entering the labour market, and their low numbers will further reduce the supply of qualified labour. The small number of people entering the labour market can be offset by investments in human capital. This will require efforts to stop young people dropping out from  professional or higher education schools and to strengthen the connections between schools and the future employers.

The quality of labour is not determined only by the level of education of the young people entering the labour market. Rapidly developing technology means that further education and training for adults is essential for both those with jobs and those without. The share of employees who do further training is much smaller in Estonia than elsewhere in Europe. Only the half of people looking for work have registered as unemployed, which they must do to take training courses through Töötukassa, the unemployment insurance fund. In addition, there are many others who would like to work but are not actively seeking a job. This means there are many ways that potential economic growth could be raised through human capital.

Source: Bank of Estonia

Authors: Orsolya Soosaar, Natalja Viilmann, Economists at Eesti Pank

Estonian agriculture is characterised by large holdings

According to the final results of the 2013 Farm Structure Survey, there were 19,200 agricultural holdings in Estonia, of which nearly 1,000 largest ones produce more than three-quarters of standard output, announces Statistics Estonia. At the same time, there are 4,500 agricultural holdings which do not produce agricultural products but only maintain their lands in good agricultural and environmental condition.

In 2010–2013, the number of agricultural holdings decreased by 2%. In recent years it is common in Estonia that after finishing their agricultural activity, the holders do not rent out their lands, but prefer to continue with the maintenance of their permanent grasslands for which the supports can be applied from the Agricultural Registers and Information Board. In three years, the number of holdings which do not produce agricultural products but only maintain their land in good agricultural and environmental condition has increased by almost 1,000. At the same time, the number of larger producers has also increased.

The utilised agricultural area of agricultural holdings continued to increase in 2010–2013, grew by 17,000 hectares and reached nearly 958,000 hectares in 2013. The increase seems to be mainly related to the use of land which was previously registered by agricultural holdings as unutilised agricultural area. Although the unutilised agricultural area of agricultural holdings has decreased by a half in three years, it still accounts for more than 13,300 hectares. Additionally, there is unutilised agricultural area also outside active holdings. So it is theoretically possible that the increase will continue but it is still closely related to the economic situation and possible restrictions planned for the maintenance of permanent grasslands. The latter may have impact also to the land rents.

In 2013, only 39% of utilised agricultural area was used by owners, 54% was rented and 7% was other tenure, of which the main share is land which is used free of any charge. Large holdings depend on rented land much more than smaller ones. Compared to 2010, the area of rented land has increased by almost 22,000 hectares.

In 2013, the number of holdings which had livestock or poultry was 8,400 and, compared to 2010, their number has decreased by 1,300. The number of holders has decreased in the case of all animal species. At the same time, there has been no remarkable decrease in the number of any livestock species and, instead, the number of cattle has increased by 9%, mainly on account of beef cattle. So, it can be said that the concentration increases also in livestock farming.

In 2013 there were 49,600 persons involved in farm work in agricultural holdings. 13,300 of them were regular employees, 4,800 non-regular employees and 31,500 holders or family labour force. Compared to 2010, the number of permanent employees has increased by 400 and family labour force by 8,200. During the last decade, the number of labour force decreased because a number of small holdings finished their agricultural activity. In the last three years there have been no remarkable changes in the number of agricultural holdings, but still one in every seven persons has withdrawn from farm work. On the one hand, already a quarter of agricultural holdings do not produce agricultural products but only maintain their land in good agricultural and environmental condition and therefore need only minimum labour input. On the other hand, agricultural production concentrates more and more to the larger holdings, which use their labour force more efficiently.

Agricultural holding is a holding where there is at least one hectare of utilised agricultural area or where agricultural products are produced mainly for sale.

The 2013 Farm Structure Survey was partly financed by the European Union.

Source: Statistics Estonia

Farmers ask for employment incentives

The Estonian Gardening Union has sent the Ministry of Agriculture a note, asking for legal changes that would allow the farmers to alleviate the labor shortage by employing children and foreigners in less strict conditions.

The Gardening Union (Eesti Aiandusliit in Estonian), an organization of Estonian gardeners and farmers, has asked the social security tax for children who are working over the school holidays and the minimum wage requirement for seasonal migrant labor to be lowered. Estonian employers are currently forced to pay higher wages to migrant workers than their Finnish counterparts, reports Saarte Hääl.

“To our knowledge the government obliges employers to pay a worker from Ukraine 1.25 times the Estonian average wage. In Finland the same worker would get 30-40 percent less than that,” said Raimond Strastin from the Gardening Union. “We wish that Estonia would make the terms equal to those in the neighboring countries, with whom our companies have to compete with in the adjacent markets.”

Strastin said continuing emigration and the government’s anti-immigration policies mean that farmers are faced with increasing labor shortages and struggles with harvests. Strawberry farms alone could offer seasonal employment to around 200 people, he said.

Valdis Kaskema, owner of one of the largest strawberry farms in Estonia, said that farmers would be happy to employ children over the summer season but they currently lack the incentive to do so.

“Pupils are socially secure anyway, so why do we still have to pay a 33 percent social security tax on them?” he said.

Hiring the unemployed for a short time period is also out of the question because those workers would lose their unemployment benefits.

Kaskema, who this year employed seven Ukrainians, said that the costs on migrant workers are unreasonably high. The 1,500 euros that he said he spent on a single worker per month, is not in accordance with the average wage of an unskilled laborer in Estonia.

Guido Lindmäe, who runs Saaremaa’s largest vegetable farm, said that the situation is made worse by the trade networks who force the prices of local products down by stocking cheap foreign produce.

“This is good for the traders and the consumers but local vegetable farmers will run without profit and the wages in the farming sector remain low,” he said. “I am ashamed to pay my employees the minimum wage but I just cannot afford to pay them what they deserve.”

Source: ERR News

Investors not interested in Linnahall building

Despite claims that the Port of Tallinn could be the Tallinn City Council’s long-awaited partner who would help refurbish Linnahall, it now turns out the company’s interest in the building is extremely limited.

Tallinn has tried to find partners and investors for Linnahall since 2009 when the concert hall, built during the Soviet era, closed its doors to the general public. This, however, has proved problematic – partially due to restrictions set on its renovation by the National Heritage Board, whose current rulings are good for another three years.

Deputy mayor Taavi Aas announced last week that the city has finally found a potential partner in Port of Tallinn. However, the company’s chairman Ain Kaljurand told Postimees that their interest lies in the harbor area, not in Linnahall itself.

Although Linnahall’s sorry state is in nobody’s interest and the decaying complex casts a shadow on the entire area, the Port of Tallinn, which owns several neighboring properties, currently has no investment plans, says

Aas has also told Postimees that Linnahall could be converted into a conference center. This would be the first step in developing conference tourism in Estonia. Estonia will hold the EU presidency in four years’ time.

Kaljurand, who applauds the idea, does not rule out that the Port of Tallinn could consider future investments if such a plan is put into development. He does, however, say that as it stands the company has no reason to invest in the derelict building.

Meanwhile, Eesti Päevaleht reports that the City Council is also considering dividing the building into three separate properties, but this would require the National Heritage Board to revise its current status quo on Linnahall, says Aini Härm, director of the Tallinn Culture and Heritage Department.

Source: ERR News


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