Only sex can save Estonian economy

The following column is written by Annika Matson, editor-in-chief of Estonian business daily Äripäev online channel aripaev.ee.

An appeal from a well-known online vendor plumped down in my mailbox today, explaining that Estonia could be salvaged from foundering only if Estonians had more sex and, by doing so, also did breed.

I took a liking to this idea as to one to bolster up our economy. Moreover, Estonian economy is listing precariously, and creative approaches to problems always pay off.

The gravity of the situation can be perceived by reading a recent Eurostat news release. According to the latest data, by 2035 the population of Estonia will have plummeted by 7 per cent, and by 2060 even by 15 per cent. The same survey predicts that, unlike in Estonia, in 13 other EU countries there would have been a sizable population  growth by the same time.

According to the estimates of the survey, Cyprus would have had the largest rise of 66 per cent.  The most serious fall would have befallen Bulgaria (28 per cent).  Estonia would have a population of 1,13 million in 2060. Estonia’s population today is 1,34 million, thus we would have 200 000 souls less.

So, rather naïvely and emotionally, I shall now try and unravel how sex could deliver us from this certain economic doom.

Read more: Only sex can save Estonian economy

In July the retail sales decreased

According to Statistics Estonia, in July 2008 compared to July of the previous year the retail sales of goods of retail trade enterprises decreased 3% in constant prices.

In July, the retail sales of goods of retail trade enterprises were 5 billion kroons. In grocery stores the retail sales of goods decreased 1% compared with July of the previous year. The retail sales in stores selling manufactured goods decreased by 5% compared with the same period of the previous year. Compared to July of the previous year, the retail sales decreased in most economic activities except mail order sale, retail sales of pharmaceutical goods and cosmetics and retail sales of other specialized stores. In the above mentioned economic activities the retail sales increased 13%, 6% and 1%, respectively. The retail sales of stores selling household goods and appliances, hardware and building materials and also stores selling textiles, clothing and footwear decreased the most (10% and 8%, respectively).

Compared to June 2008, the retail sales in retail trade enterprises increased 3% in constant prices.

In July the revenues from sales of retail trade enterprises were 5.9 billion kroons, out of which retail sales of goods accounted for 85%. Compared to July 2007, the revenues from sales increased 5% in current prices. Compared to the previous month, this indicator increased 4%.

Retail sales volume index of retail trade enterprises and its trend,
January 2000 – July 2008 (corresponding period of previous year =100)

 

Source: Statistics Estonia

The growth of wages and salaries slowed down in the 2nd quarter

According to Statistics Estonia, in the 2nd quarter of 2008, the average monthly gross wages and salaries were 13,306 kroons and the hourly gross wages and salaries were 78.26 kroons. The growth of wages and salaries that had remained around 20% in the last five quarters slowed down in the 2nd quarter. Compared to the same quarter of the previous year, the average monthly gross wages and salaries were by 15.2% and the average hourly gross wages and salaries were by 17.7% higher.

In the 2nd quarter of 2008 the consumer price index increased 11.4% and taking into account this fact the growth of real wages was only 3.4%. The growth of real wages was so small last in the 4th quarter of 2004 (3.3%).

Compared to the 2nd quarter of 2007, the average monthly gross wages and salaries increased the most in fishing, forestry and education (51.7%, 29.2% and 21.4%, respectively). The average monthly gross wages and salaries increased the least in financial intermediation; transport, storage and communication and in construction (9.8%, 12.1% and 12.2%, respectively).

Compared to the 2nd quarter of 2007, the average hourly gross wages and salaries increased the most in forestry, fishing and hotels and restaurants (41.8%, 40.7% and 23.7%, respectively). The average hourly gross wages and salaries increased the least in manufacturing; transport, storage and communication and in real estate, renting and business activities (14.3%, 15.1% and 15.1%, respectively).

The average gross wages and salaries were 12,769 kroons in April, 12,968 kroons in May and 14,160 kroons in June.

In short term statistics the average gross wages and salaries are measured as a component of labour costs. Labour costs include gross wages and salaries, employer’s social contributions and employer’s imputed social contributions to employees.

In the 2nd quarter of 2008 the employer’s average monthly labour costs per employee were 17,915 kroons and the average hourly labour costs were 119.61 kroons. Compared to the 2nd quarter of 2007, the average monthly labour costs per employee increased 15.6% and the hourly labour costs increased 17.9%.

Compared to the 2nd quarter of 2007, the average monthly labour costs per employee increased the most in forestry (51.5%) and the least in financial intermediation (10.1%).

Compared to the 2nd quarter of 2007, the average hourly labour costs increased the most in forestry (62.6%) and the least in financial intermediation (12.7%).

Statistics Estonia conducts the survey of wages and salaries statistics on the basis of international methodology since 1992. In 2008, the sample includes 11,089 enterprises, institutions and organisations. The average monthly gross wages and salaries have been given in full time units to enable a comparison of different wages and salaries, irrespective of the length of working time. Calculations of the monthly gross wages and salaries are based on payments for actually worked time and remuneration for time not worked. The hourly gross wages and salaries do not include remuneration for time not worked (holiday leave pay, benefits, etc.).

Average monthly gross wages and salaries, 1st quarter 2004 – 2nd quarter 2008 (kroons)

  Year 1st quarter 2nd quarter 3rd quarter 4th quarter
2004 7 287 6 748 7 417 7 021 7 704
2005 8 073 7 427 8 291 7 786 8 690
2006 9 407 8 591 9 531 9 068 10 212
2007   10 322 11 549 10 899 12 270
2008   12 337 13 306    

Average monthly gross wages and salaries and monthly labour costs per employee, 2nd quarter 2008

 

Average hourly gross wages and salaries and hourly labour costs, 2nd quarter 2008

 

Source: Statistics Estonia

Fitch: Latvia, Estonia face risk of recession

Latvia and Estonia face an increased risk of economic recession in the next 12 months, which may put pressure on their credit ratings, Fitch Ratings said, Bloomberg reports.

“The downturn is sharp in Estonia and Latvia and they are at risk of recession, heightening downward pressure on creditworthiness,” Fitch analyst Eral Yilmaz, said in a statement.

The economies of Latvia, Estonia and Lithuania, which lie along the eastern shore of the Baltic Sea, are slowing after a credit-led boom following European Union entry in 2004, pushing down property prices and cutting real estate sales. Estonia’s economy contracted 1.4 pct in the second quarter and Latvia’s grew 0.2 pct after the two countries had the fastest growing economies in the EU in 2005, Bloomberg writes.

Read more: Fitch: Latvia, Estonia face risk of recession

The decline in construction production continued

According to Statistics Estonia, in the 2nd quarter of 2008 compared to the same period of the previous year, the total production of Estonian construction enterprises in Estonia and in foreign countries decreased 6%. The decline in construction production that had started at the beginning of the present year continued in the 2nd quarter, too.

In the 2nd quarter of 2008 the production value of construction enterprises amounted to 9.7 billion kroons, of which the production value of building construction was 6.4 billion kroons and the production of civil engineering totalled 3.3 billion kroons. Compared to the same period of 2007 the volume of building construction decreased 12%, but the volume of civil engineering increased 10%. It was mainly caused by the decreased volumes in dwelling construction on domestic construction market. Although the volume of civil engineering grew, its influence on the construction activity was small, accounting for only a third of the total volume of construction.

Contrary to the domestic construction market which is on decline stage, the construction volume in foreign countries increased about 2% compared to the same period a year ago. The growth was caused by the building construction.

According to the data of the Register of Construction Works, in the 2nd quarter of 2008 the number of dwelling completions was 1,398, i.e. 559 dwellings less than in the same period of 2007. Similarly to the previous years, more than three quarters of completed dwellings were situated in blocks of flats. The recession, continuous increase in interest rates of settlement loans and difficulties in selling existing dwellings decreased continuously the demand for new dwellings. In the 2nd quarter of 2008 building permits were granted for the construction of 2,143 dwellings, which is a third less compared to the same period of 2007.

In the 2nd quarter of 2008, the number of completed non-residential buildings was 249 with the useful floor area of 268,000 square metres. The useful floor area of commercial and industrial buildings increased the most. Compared to the same period of 2007, the useful floor area and the cubic capacity of completed non-residential buildings increased.

Trend of construction volume index, 1st quarter 2000 – 2nd quarter 2008
(average of quarters of 2000 = 100)

 

Source: Statistics Estonia

Eesti Pank: fiscal balance should be preferred to other election promises

Economic policy statement of Eesti Pank,
27 August 2008

Compared to spring 2008, the external environment has become more fickle in the summer. While at the beginning of the year Estonia’s main trading partners enjoyed considerably rapid growth, it slowed remarkably in the second quarter with the euro-area economy even shrinking by 0.2 per cent. Commodity prices, which have fallen somewhat during the past month, still keep inflation high in the entire world. The external environment is likely to stay volatile in the near future and there are no considerable improvements in sight for the second half of the year.

The Estonian economy is adjusting after a period of very fast domestic demand growth and this process is accompanied by slowing economic growth. In light of Eesti Pank’s spring forecast, it can be said the economy is developing according to the scenario of a speedier decline in domestic demand, especially investment growth. Therefore it is possible that real growth will be negative this year. However, this will be accompanied by the withdrawal of several risks related to rapid credit growth, current account deficit and inflation. The exporting sector has managed satisfactorily so far. We expect economic growth to recover in 2009. To this end, resources should be reallocated in order to reinforce the export potential even more. In addition, the labour market should quickly react to the changing economic conditions.

Economic cooling has alleviated domestic price pressures and the external vulnerabilities have started to decrease. The current account deficit has decreased notably and the trade deficit has narrowed as well. Nevertheless, the above 10 per cent current account deficit and inflation should continue to decline in the next months. Domestic market oriented enterprises should adapt their decisions to the changing conditions even more. In Eesti Pank’s opinion, indexation should definitely be avoided when determining wages and the prices of services.

The August forecast of the Ministry of Finance forms a good basis for preparing the state budget. At the same time, the forecast expects the budget revenue growth rate to remain close to the long-term average. In Eesti Pank’s opinion, one should be ready for poorer revenue collection than expected. In addition, the state needs to critically review their longer-term expenditure plans.

Eesti Pank supports the government’s objective to prepare the 2009 state budget so that it would be at least in balance. Taking into account the forecast of the Ministry of Finance and the risks arising from the current economic situation, this is the only possible goal for the next year. In Eesti Pank’s opinion, fiscal balance should be preferred to other election promises, which should possibly be postponed. Keeping income and expenditure in balance is a reasonable compromise against the backdrop of the uncertain global economic outlook and provides a good basis for passing over to a sustainable expenditure growth pace, still leaving enough space for dealing with unexpected events.

In the convergence programme sent to the European Commission and the Council of the European Union, the government has confirmed that in the medium term, the budget must be in surplus. This is necessary for reasons related to the expenses arising from the ageing population, unexpected events originating from the external environment, the international credibility of the Estonian economy, as well as national security. In Eesti Pank’s opinion, the objective of a surplus should be specified in the course of further fiscal policy making and the specified objective should be considered when annual budgets are prepared.

Eesti Pank’s autumn forecast will be published on 22 October 2008.

Source: Eesti Pank

WWF recognises Estonia for reducing pollution of Baltic Sea

The World Wildlife Fund (WWF) has commended Estonia as the Baltic Sea country which most effectively reduced maritime pollution in its recent report.

In a comparison of the nine Baltic Sea countries, Estonia has most effectively reduced the effect of harmful substances to the Baltic Sea environment, stated the WWF report released Wednesday in Stockholm.

Among the nine Baltic Sea countries, protection of the marine environment is at the highest level in Germany, followed by Denmark and Estonia.

The WWF compared the Baltic Sea countries in different spheres of the protection of the Baltic Sea marine environment, such as biodiversity, fishery, harmful substances, and maritime transport. The organisation also assessed how management of the sea has been organised in the countries.

The WWF report brought Latvia and Lithuania into a positive light for fighting illegal fishing, as both the countries recently gave environmental inspectors the right to punish those caught poaching on the spot.

Mats Abrahamsson, director of the WWF Baltic Sea region, said that protection of the Baltic Sea needs political leadership that can see above national and different sectors’ interests and will approach the solution of problems in wider terms than it has been done previously.

Source: Estonian Review

Estonian economy set to return to growth in 2009

According to the summer 2008 economic forecast of the Ministry of Finance, the Estonian economy will grow by 2.6 percent in 2009, with inflation dropping to 6 percent. The economy is quickly adjusting from a situation of economic growth surpassing potential to a more sustainable level.

 

The slowdown in economic growth, which has been more rapid than expected, is the result of both domestic and external factors. From global developments, Estonia is most affected by high energy prices, the general slowdown in the growth of the global economy and the uncertainty related to it. The negative domestic impact has been produced by the accelerated rise in prices, the sharp cooling down of the real estate market and the rapid decrease in domestic demand.

Minister of Finance Ivari Padar says that 2008 and early 2009 are unlikely to be an easy time. “Having said that, the slowdown in economic growth should bring inflation down and lead to a reduction in the macroeconomic risks which have arisen in recent years,” he explained. “Reduced consumption indicates that people are already thinking through more before making decisions.”

According to the minister, the corrections in the 2009 state budget volume will mean additional discussions for the cabinet. “In the light of today’s forecast we will have to review the possibilities for extra revenues in budget,” he said. “But it’s clear that the state will be able to cut back expenditures to a certain point, and we’ll have to make use of ways of increasing our revenues. We don’t have all that much time in our hands to make these decisions – fundamental ones will have to be made within the next month.”

Source: Estonian Ministry of Finance

In June both exports and imports of goods decreased

According to Statistics Estonia, in June 2008 the value of exports of goods in current prices was 10.7 billion kroons and the value of imports of goods 14.3 billion kroons. The value of both exports and imports decreased compared to June of the previous year.

In the first half-year of 2008 the value of the exports of goods was 65.8 billion kroons or 5% more compared to the same period of the previous year. At the same time the value of imports decreased by 4%, amounting to the value of 85.9 billion kroons. The exports of goods grew by 5% both in the 1st and in the 2nd quarter, imports fell by 3% and 4%, respectively. In the first half-year of 2008 the foreign trade deficit was 24% smaller compared to the same period of 2007.

In June the exports of goods amounted to 10.7 billion kroons. Compared to June of the previous year, the nominal exports of goods decreased 1%. The value of imports of goods to Estonia amounted to 14.3 billion kroons, which was 5% less compared to June of the previous year. The decline was mainly caused by the decrease of imports in the section of transport equipment. The foreign trade deficit was 3.6 billion kroons or 15% less than in June of the previous year.

Estonian foreign trade, January–June, 2007–2008

Month Exports, million kroons Imports, million kroons Balance, million kroons
2007 2008 change, % 2007 2008 change, % 2007 2008
January 9 693 10 121 4 13 861 13 575 -2 -4 168 -3 454
February 9 754 10 514 8 13 207 13 608 3 -3 453 -3 094
March 10 439 10 684 2 15 407 14 130 -8 -4 968 -3 446
April 10 387 12 261 18 15 580 15 860 2 -5 193 -3 599
May 11 692 11 579 -1 16 040 14 429 -10 -4 348 -2 850
June 10 743 10 683 -1 14 943 14 251 -5 -4 200 -3 568
Total semi-annual 62 708 65 842 5 89 038 85 853 -4 -26 330 -20 011

In June the share of the EU countries was 73% and the share of CIS countries accounted for 13% of the total exports (in June of the previous year 69% and 10%, respectively). Compared to June of the previous year, the exports of goods to the EU countries increased by 0.4 billion kroons (5%), and the exports to CIS countries by 0.3 billion kroons (28%). The main countries of destination were Finland, Sweden and Russia. The biggest decline was announced in exports to Latvia and to the United States of America.

In total imports of goods, the share of the EU countries was 82% and that of the CIS countries 11% (in June of the previous year 77% and 14%, respectively). Imports from the EU countries increased by 0.1 billion kroons (1%) compared to June of the previous year, at the same time imports from the CIS countries decreased by 0.5 billion kroons or by a quarter. Main countries of consignment were Finland, Germany and Lithuania. Imports of goods from Russia decreased significantly — 0.8 billion kroons. The same increase, i.e. by 0.8 billion kroons, was announced in imports from Lithuania.

In both exports and imports, the most important commodity section was machinery and equipment which accounted for over one fifth of both flows. One third of the growth was detected in the exports of metals and products thereof. The exports of mineral fuels decreased by 0.4 billion kroons.

In imports of goods, a growth was detected only in the section of mineral fuels — by 0.3 billion kroons. A significant decline was observed in the section of transport equipment and in the section of wood and products thereof (0.6 and 0.3 billion kroons, respectively).

Main foreign trade partners of Estonia, June 2008

Country of
destination,
group of
countries
Exports,
million
kroons
Share,
%
Change
compared to
same month
of previous
year, %
Country of
consignment,
group of
countries
Imports,
million
kroons
Share,
%
Change
compared to
same month
of previous
year, %
TOTAL 10 683 100 -1 TOTAL 14 251 100 -5
EU-27 7 809 73 5 EU-27 11 622 82 1
CIS 1 381 13 28 CIS 1 538 11 -25
1. Finland 2 061 19 13 1. Finland 2 018 14 -15
2. Sweden 1 585 15 14 2. Germany 1 897 13 5
3. Russia 1 063 10 24 3. Lithuania 1 739 12 87
4. Latvia 947 9 -22 4. Sweden 1 366 10 -11
5. Lithuania 594 6 -12 5. Latvia 987 7 -9
6. Germany 556 5 0 6. Russia 799 6 -51
7. United States 451 4 -39 7. Netherlands 728 5 42
8. Norway 393 4 -3 8. Poland 585 4 -7
9. Denmark 362 3 15 9. Belarus 452 3 104
10. United Kingdom 354 3 15 10. Italy 381 3 -11

Exports and imports of goods by commodity sections, June 2008

Commodity section by Combined Nomenclature (CN) Exports Imports Balance,
million
kroons
million
kroons
share,
%
change
compared to
same month
of previous
year, %
million
kroons
share,
%
change
compared to
same month
of previous
year, %
TOTAL 10 683 100 -1 14 251 100 -5 -3 568
Agricultural products and food preparations (I-IV) 855 8 11 1 496 11 15 -641
Mineral products (V) 1 016 10 -27 2 466 17 16 -1 450
Raw materials and products of chemical industry (VI) 600 6 17 1 150 8 16 -550
Articles of plastics and rubber (VII) 356 3 1 728 5 -7 -372
Wood and products thereof (IX) 947 9 -18 373 3 -43 574
Paper and articles thereof (X) 265 2 -14 285 2 -1 -20
Textiles and products thereof (XI) 441 4 -15 631 4 -7 -190
Metals and products thereof (XV) 1 563 15 33 1 563 11 -6 0
Machinery and equipment (XVI) 2 395 22 5 2 998 21 -5 -603
Transport equipment (XVII) 821 8 -10 1 582 11 -28 -761
Miscellaneous manufactured articles (XX) 749 7 -10 307 2 -20 442
Other 675 6 24 672 5 -9 3
Source: Statistics Estonia

Net profit of Port of Tallinn up by one tenth

The consolidated net profit of Estonia’s AS Tallinna Sadam grew by one tenth to 252.6 million kroons (EUR 16.14 mln) in H1 against the same period last year thanks to a lower income tax on dividends.
The operating profit of the company in H1 this year amounted to 318 million kroons, 24.3 million kroons less than in the same period last year.

The consolidated revenue of the company totalled 615.4 million kroons, 5.7 percent less on year, Tallinna Sadam informed the stock exchange.

The contraction in the revenue was due to the decline in the trade volume, the effect of which surpassed the positive effect of the number of passengers and total capacity of the passenger ships they were carried on.

Expenses connected with the main operations remained almost unchanged and totalled 311 million kroons.

In H1 2008 the group invested into new infrastructure sites and improvement of the existing ones a total of 196 million kroons, 209 million kroons less than in the previous year.

In H1 this year the freight volume handled at harbours belonging to AS Tallinn Sadam contracted by seven million tons or 32 percent to 14.8 million tons. Tallinna Sadam belongs to the Republic of Estonia.

Source: Estonian Review

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