Estonia in the bottom of recession, economy stabilizing

Ministry of Finance of Estonia concluded in Summer 2009 Economic Forecast, released on 27th of August, that Estonia is at the bottom of economic recession and the economy is showing signs of stabilizing. Although economic indicators continue to recede on year-on-year perspective, the fall in quarterly figures has stopped. This indicates that Estonian economic environment is clearly on the stabilizing path. 

According to the forecast the Estonian economy shrinks by 14,5% on 2009 and by 2% on 2010.

 
Minister of Finance Mr Jürgen Ligi stated that Estonia and our general government budget have adjusted well with the economic situation. “In comparison with the spring forecast the economic outlook has changed, but the signs of stabilization are clearly visible. Nevertheless, Estonia needs additional decisions to be ready for joining the eurozone and keeping our revenues and expenditures under control,” Ligi added.
 
For the first time after regaining independence Estonia experiences deflation. On 2009 deflation reaches 0,1%, turning back to 0,1% inflation on 2010.
 
According to the Summer 2009 Economic Forecast, Estonia meets the so far unattainable Maastricht inflation criterion in November.  “Meeting the Maastricht criteria, especially the criterion on budget deficit, and joining the eurozone is one of Estonia’s important means for the path to the economic growth,” said the Minister of Finance. 
Please find the short brief of the Summer 2009 Economic Forecast by Ministry of Finance of Estonia here

Source: Estonian Ministry of Finance

Stable decrease in industrial production

According to Statistics Estonia, in August 2009 compared to August of the previous year, the production of industrial enterprises decreased 28%. Since February the decrease in production has been within the limits of 30% compared to the same month of the previous year.

During August, the situation in manufacturing did not change significantly — the production fell 29% compared to the same month of the previous year. The main reason causing the decline was insufficient demand both in domestic and external markets.

The production decreased in all branches of manufacturing except the manufacture of beverages and the manufacture of pharmaceutical products. The decrease in the manufacturing of food products (3%) was the smallest. The decline in the production of food was retarded by the decrease of producer prices. Since the beginning of the year, the producer prices of milk, flour and oil have decreased significantly. The growth in production of distilled spirits and beer compared to the same month of the previous year was caused by low comparison basis due to the growth of excise tax in July 2008. Compared to August of the previous year, the manufacture of electronic products, motor vehicles and machinery and equipment fell more than 40%. The manufacture of metal and chemical products and building materials decreased more than 30%.

In August compared to August of the previous year, the production of electricity decreased 39%, the production of heat decreased 17%. The decrease in electricity production was caused by partly replacement of own production with imports from Lithuania.

In August compared to July, industrial production total as well as manufacturing fell 1% according to the seasonally adjusted data. From January to April, the decrease in industrial production remained within 4% compared to the previous month, in May the production increased 2%, in June decreased 1%, in July increased 2% again.

The volume index and trend of production in manufacturing, January 2000 – August 2009
(2005 = 100)

Diagram:"The volume index and trend of production in manufacturing, January 2000 – August 2009 (2005 = 100)"

See more from Statistics Estonia

2008 was profitable for private persons

According to Statistics Estonia, tax benefits turned the year 2008 an unprecedented profitable tax year for the residents of Estonia, enabling substantially to reduce the tax burden of the employed persons.

During the last five years several tax changes profitable for private persons have taken place. The income tax rate was lowered from 26% to 21% and the tax-free part of the gross income rose from 16,800 kroons to 27,000 kroons per year. Income tax benefits of private persons promote mostly children, own home foundation, pension collection and further education. Using all tax benefits of natural persons provided in the Income Tax Act, a wage earner’s real tax rate after tax return could become much lower of the valid rate — 21%.

For example an employed married couple with two children, who earned gross wages and salaries in total 20,000 kroons per month (240,000 kroons per year), whose income was reduced by unemployment insurance by 1,440 kroons, who had 1 million mortgage loan for 15 years and who paid 52,000 kroons loan interests, who had 1,600 kroons education expenditure and who took into account the tax-free part of their two children (54,000 kroons as total), got from the state approximately 22,600 kroons of income tax returns. Hereby the tax rate for this family was only 7% instead of 21%, which is three times less than they paid to the state from their income per annum.

In 2008, the revenues from the taxes and social security contributions increased by 2.6%, the state’s income being 80 billion kroons. The growth rate of income slowed down, as a year earlier the growth was 23%. In 2008, an equal share of the government sector revenue came from taxes on production and imports (37.9%) and social security contributions (37.2%). The income tax revenue accounted for a quarter of the total income.

Personal income tax by recipient, 2004–2008

Diagram:"Personal income tax by recipient, 2004–2008"

 

Source: Statistics Estonia

2008 budget deficit was 2.7 pct of GDP

According to adjusted data of Statistics Estonia, the Estonian general government sector deficit in 2008 was 2.7% and gross debt level was 4.6% of Gross Domestic Product (GDP). General government budget’s deficit remained within the limits set out in the Maastricht Treaty.

In 2008, the total expenditures of the general government sector budget exceeded the revenues by 6.9 billion kroons. The central government sector deficit was 2.4% and the local governments’ sector deficit 0.6% of GDP. Surplused by 0.6 billion kroons the social security funds sector improved the general government deficit indicator by 0.3 percentage points.

The general government gross debt level increased in 2008 up to 11.6 billion kroons, growing by a quarter compared to the previous year. The central government’s debt level increased last year 35% compared to 2007, however, accounting for only one third of the general government sector’s total debt. In 2008, the total borrowing of the local governments sector increased to 8 billion kroons.

State and Local Governments’ debt levels, 2005–2008

Diagram:"State and Local Governments’ debt levels, 2005–2008"


This year Statistics Estonia recalculated the general government accounts data for the period 2004–2008 based on the accrual accounting methods and revised time-series of GDP aggregates starting from 1995, where additionally to the regular revision of the national accounts data, the calculations of actual and imputed rents were also revised. Therefore the adjusted data for general government debt and budget’s surplus/deficit published in this news release are not entirely comparable with the preliminary data published by Statistics Estonia at the end of March.

Source: Statistics Estonia

Harvesting period is timely this year

According to Statistics Estonia, by 15 September, 81% of the sown area of cereals, 21% of the sown area of rape and turnip rape, and 42% of the area under potatoes had been harvested.

Compared to the previous year when climate conditions were extremely unfavourable during harvesting period, the harvesting period is timely this year and even early for potatoes. At the same time a year earlier, only 53% of the sown area of cereals, 16% of the sown area of rape and turnip rape, and 32% of the area under potatoes had been harvested.

According to preliminary data, in 2009 cereals were grown on 328,800 hectares, of which 81% has been harvested for grain, of which 91% of rye, 73% of wheat, 90% of barley and 68% of oats. One hectare of the harvested area gave on an average 2,936 kilograms of cereals, of which 2,767 kilograms of rye, 3,214 kilograms of wheat, 2,776 kilograms of barley and 2,869 kilograms of oats. Part of cereals is not harvested yet and part of cereals sown for grain will be harvested for green fodder.

Rape and turnip rape were grown on 78,200 hectares, of which 21% has been harvested. One hectare of the harvested area gave on an average 1,749 kilograms of rape and turnip rape seeds.

Potatoes were grown on 9,200 hectares, of which 42% has been gathered. One hectare gave on an average 24,142 kilograms of potatoes.

Source: Statistics Estonia

Immigrants who speak Estonian are more successful on the labour market

According to Statistics Estonia, the Immigrant Population Survey reveals that in case of immigrant occupational career the skill of the Estonian language is more important than the immigrant background.

In spite of the rapid changes on the labour market recently, which have been mainly expressed through the growth of unemployment big differences of occupational division remained comparing immigrants with and without the Estonian language skill.

The comparison of native Estonians and Estonian-speaking immigrants indicates that there are some differences between the distribution of occupations in the groups, but they do not amount to a confirmation of occupational division. However, signs of division can be detected in the distribution of occupations among immigrants with the skill of the Estonian language and immigrants without the skill of the Estonian language. More than a half of immigrants without the skill of the Estonian language were employed as skilled workers or operators. The share of unskilled workers was also rather high in this group (13%). The share of persons employed as managers, specialists of different levels or officials was 21%.

The group of employed native Estonians and immigrants with the skill of the Estonian language included the highest number of top specialists, mid-level specialists and officials. These occupation categories were also dominant among the immigrants with the skill of the Estonian language — top specialists, mid-level specialists and officials even accounted for more than a half of the employed persons in this group (54%), this indicator was even larger than that among the native Estonians (37%). The percentage of managers, senior officials or legislators was the highest among the native population of the Estonian nationality — 17%. Among immigrants with the skill of the Estonian language there were 11% of managers, senior officials or legislators. Another characteristic in the distribution of occupations among native Estonians and immigrants with the skill of the Estonian language was the relatively small percentage of unskilled workers (less than 5%).

The Immigrant Population Survey was conducted by Statistics Estonia for the first time in 2008. Immigrant population has been defined as the people living in Estonia whose parents were born in a foreign state. In addition, if only one non-Estonian-born parent is known, the respondent is considered as a part of immigrant population. In 2008, the share of immigrant population among the permanent residents of Estonia was 24%. Native Estonians are the residents of the Estonian ethnic nationality whose both or one parent was born in Estonia.

Occupations of native and immigrant population aged 25–49 by the background and the skill of the Estonian language, 2008

Diagramm:"Occupations of native and immigrant population aged 25–49 by the background and the skill of the Estonian language, 2008"


A more detailed analysis was published today, on 28 September in the publication “Immigrantrahvastik Eestis. 2009. Immigrant Population in Estonia” http://www.stat.ee/31389

The analytical publication provides an overview of immigrant population in Estonia and compares it with the native population. The major part of the analysis includes immigrants on the labour market — employment, income, wages and salaries, occupational structure and its relation to the educational level. Job changes and the description of the job searching as well as the indicators characterising the integration process have also been discussed. Integration and immigrants’ connections to the country where immigrants’ parents were born have been analysed as well.

Source: Statistics Estonia

Glamox to move its factory from Norway to Estonia

Norwegian industry group  Glamox will close one of four offices in its home country and will move production to Keila, Äripäev reports.

Lighting producer Glamox HE will create 15 new jobs. 

The move will help Glamox to save money and increase productivity.

“The production volume will increase by about 1/3. We’ve done earlier preparations since we lacked room before. So we already have building’s extension and machinery, which is why moving production from Norway to Estonia needs no additional investments,” Meelis Peterson, the CEO of Glamox HE said.

He didn’t say how much the company will save.

Source: BBN

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