The Estonian economy grew 0.7 pct in 2015 4Q

According to the flash estimates of Statistics Estonia, the gross domestic product (GDP) of Estonia increased 0.7% in the 4th quarter of 2015 compared to the 4th quarter of 2014.

In the 4th quarter of 2015, the seasonally and working-day adjusted GDP increased by 1.2% compared to the previous quarter and by 0.9% compared to the 4th quarter of 2014.

GDP growth in the 4th quarter was positively influenced by net taxes on products. The receipts of value added tax and payments of subsidies increased.

In the 4th quarter of 2015 foreign demand decreased. The export of goods of the total economy decreased at real prices by 4% compared to the 4th quarter of 2014. Additionally, the real import of goods of the total economy decreased 3% compared to the same quarter of the previous year. According to the preliminary estimates, the Estonian foreign trade was influenced the most by the decrease in the exports and imports of mineral products (incl. motor spirit, fuel oils, gas) and electrical equipment.

Diagram: GDP, growth of the export and import of goods compared to the same quarter of the previous year

The flash estimate of economic growth is calculated only by production approach using VAT return information from the Estonian Tax and Customs Board and data from various statistical actions of Statistics Estonia which have been obtained by the time of preparing the estimate. Therefore, the flash estimate may differ from the revised estimates of the GDP, which are based on the respective quarterly data and calculated by expenditure, production and income approach.

The revised GDP estimates for the 4th quarter of 2015 will be published by Statistics Estonia on 10 March.

Source: Statistics Estonia

Weak export demand behind the sluggish economic growth

According to the flash estimate of Statistics Estonia, GDP grew by 0.7% yoy in Estonia in 4Q 2015. The growth rate met our expectations. Compared to the previous quarter, GDP grew by 1.2% (seasonally and working day adjusted). In 2015, GDP grew by 1.2% in real terms, according to the preliminary calculations. 

Decrease in exports inhibited GDP growth the most 

According to the flash estimate, export of goods decreased by 4% yoy in the fourth quarter. The major share of the drop in exports came from the Russian market. Decrease of exports to the Russian market was broad based. The increase of exports to many European countries did not compensate the decrease on the Russian market. Although export dropped in the fourth quarter, the decrease slowed down in the last two months of the year.

Decrease in investments are expected to recede 

The accelerated growth of import of capital goods indicates the possible improvement of investments in the fourth quarter of the last year and the beginning of 2016. However, improved demand, as well as an increase in prices, is a precondition for a recovery of investments without a decrease in business sector profits and profitability. We expect that the very low interest rate environment will persist in 2016-2017, supporting lending for investments. In 2016, the government is expected to use more EU funds in its investments, while household investments in dwellings should continue its moderate pace.

Slow down of the growth of purchasing power is expected to limit the growth of private consumption 

Robust growth of retail sales refers to the ongoing fast growth of private consumption in the fourth quarter. However, the growth of net wages in real terms are expected to slow in this year, as prices will start growing and labour taxes will be lowered less than in 2015. We expect the robust growth of private consumption to slow gradually, and this will set some limits to growth in retail trade, as well as in other domestic services. However, the financial situation of households remains relatively strong. A rise in pensions, children’s allowances, and other social benefits will further support private consumption, especially of those with lower earnings, and prevent it from slowing drastically.

We expect improvement of economic growth in this year, but downward risks are considerable 

Helped primarily by the recovery of exports and investments, GDP growth in Estonia is expected to accelerate to 2.3% this year. The economies of Estonia’s main trading partners are expected to improve in 2016. This should offer more possibilities to expand exports for enterprises dependent on foreign demand. However, we expect only a modest recovery of Estonian exports. This year should offer better possibilities to export more to the European markets, while enterprises dependent on the Russian market and on global oil prices should not expect considerable improvement. There are considerable downward risks for the improvement of foreign demand. In addition, the expected decline in employment, as well as the reduced investments and labour productivity over the last few years, will afford less capacity to grow in the medium term

Source: Swedbank

Tourists spent 1.3 bEUR in Estonia in 2015

  • The number of foreign visitors was the same in 2015 as it was in 2014, as 6.2 million trips were made to Estonia and around 1.3 billion euros were spent here
  • Estonian residents made some 4 million trips to other countries, which was 3% more than in 2014, and they spent around 800 million euros abroad

The number of foreign visitors was the same in 2015 as it was in 2014, as 6.2 million trips were made to Estonia. Foreign visitors consumed around 1.3 billion euros of goods and services in Estonia.

The number of visitors from Finland was about the same as in the previous year, as was their share of all visits at 39%. The number of visitors from other European Union countries increased by an average of 6%1. The biggest growth was of 21% in the number of tourist visits from Austria, 17% in the number from Spain, and 15% in those from Germany, while 15% fewer tourists came from Portugal and 17% fewer from the Czech Republic.

One visit to Estonia in four was made from outside the European Union. The biggest fall was the drop of one quarter in the number of visitors from Russia, who made some 836,000 visits to Estonia altogether, accounting for 13% of the total. The number of visitors from the USA increased by 70%, mainly due to same-day visits, of which there were 90,000 more. The number of tourists from Asia has increased for several consecutive years, and their numbers increased by one third in 2015, though they account for only a small part of the total number of tourists.

The number of same-day visits increased by 5% and made up 55% of the total number of visits, while the number of tourists staying overnight was down by 5%. Some 70% of visitors on multi-day visits stayed with accommodation providers in Estonia, and they stayed for an average of 4.8 days, making the average visit 7% longer than in 2014.

Estonian residents made some 4 million trips to other countries, which was 3% more than in 20142. Visitors from Estonia to foreign countries spent an estimated 800 million euros there.

There was not much change from 2014 in the preferred travel destinations for Estonian residents, and the top ten destinations remained the same. Three quarters of those visits were made to the European Union. The number of visits to Finland was down 7%, while 5% more visits were made to the rest of the European Union, and those visits made up more than half of the total. There was a notable increase of 15% in the number of trips by Estonian residents to Austria, of 16% in trips to Croatia, 21% in trips to Italy and 68% in trips to Slovakia.

The growth of the previous year continued in trips to sunny destinations, with 30% more trips to the United Arab Emirates, 14% more to Greece, 22% more to Turkey and 6% more to Thailand. Egypt has been losing popularity as a travel destination for six years, and last year there were one quarter as many trips there as in 2009.

Trips to Russia stayed constant at 380,000 and the number of visits to other countries in the CIS increased by one third.

Single-day visits accounted for a little more than one quarter of the total, and there were 4% fewer such visits. There were 6% more multi-day visits by Estonian residents, but their average length remained constant at 4.6 days.

1 All comparisons have been drawn on an annual basis, if not indicated otherwise.

2 The number of trips abroad and the number of foreign countries visited are not the same, as one trip abroad may include visits to several different countries.

Visits abroad by Estonian residents

 

Visits to Estonia by non-residents

Visits abroad by Estonian residents in 2015

Visits to Estonia by non-residents in 2015


More detailed information can be found on the Eesti Pank website under International travel statistics. The methodology for collecting International travel statistics was designed by researchers at Eesti Pank and the University of Tartu in partnership with OÜ Positium LBS. The mobile positioning data are collected and processed by OÜ Positium LBS, which gets the data from the telephone network operators in an anonymised form so as to protect fully the privacy of the telephone users. Statistical methods for the use, processing and presentation of the data do not permit identification of any individual telephone or user and comply with the law on personal data protection. A more detailed description of the methodology can be found on the Eesti Pank website under International travel statistics.

Source: Bank of Estonia

Author: Tarass Snitsarenko, Eesti Pank Statistics Department

Prices in Estonia are at the level of three years ago

  • In contrast to the rest of the euro area, Estonia has seen its price level fall, as local energy prices react immediately to the global oil price
  • The deflation that has lasted almost two years has benefited consumers so far, as essential costs like energy and some foodstuffs have declined
  • Weak demand and weak price rises in foreign markets are constricting opportunities for exporting companies. Companies oriented to servicing the domestic market are relatively better off
  • The tax rises in February will affect consumer prices in the coming months

The Estonian consumer price index continued to drop in January. Data from Statistics Estonia show that the price level in January was 0.1% lower than in December and 0.6% lower than in the previous January. Harmonised consumer price inflation for the euro area has picked up in recent months and stood at 0.4% in January. The current price rises in the euro area are still below the target of the European Central Bank to maintain inflation at below but close to two per cent.

The divergence in inflation rates in Estonia and the euro area is largely due to energy prices. Sources of energy have fallen further in price in Estonia than they have on average in the euro area because taxes and distribution costs account for about one third less of the price of energy in Estonia. Falls in the oil price pass through to consumer prices much faster in consequence, so cheaper oil brought inflation down in January by 1 percentage point in Estonia but by 0.6 percentage point in the euro area as a whole.

The deflation that has lasted for almost two years has benefited consumers so far, as essential costs like energy and some foodstuffs have declined. The lack of inflation pressures in the region as a whole has been a problem for companies however. Weak demand and weak price rises in foreign markets are constricting opportunities for exporting companies. Companies oriented to servicing the domestic market are relatively better off as rising real incomes for households have supported sales at home. This is shown by retail sales volumes, which increased by 10% in December to an all-time high of 510 million euros. Core inflation, which mainly reflects developments in domestic prices, stood at 0.9% in January. Prices of services were up by 1.6% and those of industrial goods by 0.5%.

The current price level is similar to what it was three years ago, but over the past decade the price level in Estonia has climbed by 43%. Administratively regulated prices, which are mainly for some public services and a part of the energy price, have raised the general price level by 4% and consumption taxes have done so by 9%. The tax rises in February will affect consumer prices in the coming months in the same way. Rises in excise this year will lift the price level by around 0.7% and so contribute more than half of the forecast inflation rate of 1.2% for the year. Part of the rise in prices will be postponed because of warehouse stocks, as shop prices for alcohol are expected to rise during a couple of months after the increase in excise, while the retail price of motor fuels on service station forecourts rose straight away in the first days of February. Even after the rises this year in excise, prices for motor fuels in Estonia are still about one fifth lower than the average in countries of the European Union.

Estonian CPI inflation

Source: Bank of Estonia (see better graph here)

Author: Rasmus Kattai, Economist at Eesti Pank

Estonia’s foreign trade continued to decline in 2015

According to Statistics Estonia, in 2015, exports from Estonia amounted to 11.6 billion euros and imports to Estonia to 13.1 billion euros at current prices. Trade has been declining for the last three years but the biggest fall occurred in 2015.

In 2015, the exports of goods decreased by 4% and imports by 5%, compared to 2014. A year-over-year comparison shows that exports decreased both in 2013 and 2014 by 2% and imports by 1%. The bigger decline in 2015 was influenced the most by trade in mineral products (incl. motor spirits, fuel oils, electrical energy) and electrical equipment (incl. data communication equipment).

The trade deficit was 1.4 billion euros and it decreased by 249 million euros compared to 2014. The trade balance was positive in trade in wood and products thereof, miscellaneous manufactured articles, electrical equipment, and paper and articles thereof. The biggest trade surplus was recorded in trade with Sweden, Norway and the USA and the biggest trade deficit occurred in trade with Germany, Poland and Lithuania.

In 2015, the share of European Union countries was 75% in the exports of goods and 83% in imports; compared to 2014, the indicator increased 3% for exports, but remained on the same level for imports.

In 2015, the main countries of destination were Sweden (19% of Estonia’s total exports), Finland (16%) and Latvia (10%). Electrical equipment and miscellaneous manufactured articles (incl. furniture) were mainly exported to Sweden, electrical equipment and metals and products thereof to Finland, and mineral products (incl. electrical energy) and agricultural products and food preparations to Latvia. The largest drop was recorded in exports to Russia (down by 412 million euros), Belgium (down by 113 million euros) and Latvia (down by 96 million euros). Exports to Russia decreased on account of mechanical appliances and agricultural products and food preparations. Fewer mineral products were exported to Belgium and less raw materials and products of the chemical industry to Latvia. The most significant increase occurred in exports to the Netherlands, Lithuania and the United Kingdom.

The main countries of consignment in 2015 were Finland (14% of Estonia’s total imports), Germany (11%), Latvia (9%) and Lithuania (9%). Mineral products and electrical equipment were mostly imported from Finland, mechanical appliances and transport equipment from Germany, agricultural products and food preparations from Latvia and mineral products from Lithuania. The most significant fall occurred in imports from Finland (down by 200 million euros), Germany (down by 134 million euros) and Russia (down by 97 million euros). Imports from Lithuania and Spain increased the most.

In 2015, the most important commodity group in exports was electrical equipment (21% of Estonia’s total exports), followed by wood and products thereof (10%), and agricultural products and food preparations (10%). The drop in Estonia’s exports in 2015 compared to 2014 was mostly influenced by a fall in the exports of mineral products (down by 245 million euros), electrical equipment (down by 165 million euros) and agricultural products and food preparations (down by 76 million euros). The exports of miscellaneous manufactured articles and wood and products thereof increased the most.

In 2015 the biggest share of Estonia’s imports was held by electrical equipment (18% of Estonia’s total imports), followed by mineral products (11%), and agricultural products and food preparations (11%). The fall in imports was influenced the most by a drop in the imports of mineral products (down by 361 million euros), electrical equipment (down by 206 million euros) and agricultural products and food preparations (down by 86 million euros). At the same time, the imports of transport equipment and miscellaneous manufactured articles increased.

In December 2015, the value of the exports of goods was 0.9 billion euros and the value of imports was 1.1 billion euros. In December 2015 compared to December 2014, exports remained on the same level and imports decreased by 3%.

The statistics are based on the questionnaires “Intrastat” and “Exports” (sale of fish and crustaceans in foreign waters and ports)”, the due dates of which were, respectively, 14 January 2015 and 15 January 2015, and on the customs declaration data of the Estonian Tax and Customs Board, which were sent to Statistics Estonia on 20 January 2015. Statistics Estonia published the monthly summary of foreign trade in 12 working days.

Read more from Statistics Estonia

In 2015, industrial production decreased

According to the preliminary data of Statistics Estonia, in 2015, the production of industrial enterprises fell 2% compared to the previous year. Production decreased in energy and mining as well as in manufacturing.

While at the beginning of 2015 manufacturing production grew compared to the same month of the previous year, then in the second half year the growth turned into decline. In 2015, production in manufacturing fell 1% compared to 2014. More than half of the branches of industry did not surpass the volume of the previous year. The growth in the production of manufacturing was negatively influenced by the branches holding bigger shares: the manufacture of electronic products decreased 4%, the manufacture of chemical products 12% and the manufacture of building materials 5%. Although in many of the branches of industry that hold larger shares (the manufacture of wood products, metal products, electrical equipment, furniture and motor vehicles) production rose, it did not compensate for the fall in other, smaller branches.

In 2015, both exports and domestic sales of manufacturing production decreased. 70% of the whole production of manufacturing was sold on the external market. Export sales as well as sales on the domestic market fell about 2% compared to 2014.

In December 2015, the working-day adjusted industrial production decreased 9% compared to December 2014; the production of manufacturing fell 7%. In December 2015 compared to December 2014, the production of electricity decreased by 23% and the production of heat by 16%.

In December 2015 compared to November, the seasonally adjusted industrial production decreased 3%; the production of manufacturing fell 2%.Diagram: Volume index of production in manufacturing in the European Union countries

Read more from Statistics Estonia

Retail sales 390 euros per inhabitant in December 2015

According to Statistics Estonia, in December 2015 compared to December 2014, the retail sales of goods of retail trade enterprises increased 10% at constant prices. While in November, the retail sales increased 6% compared to the same month of the previous year, in December the retail sales growth accelerated.

In December 2015, the retail sales of goods of retail trade enterprises were 510.7 million euros, which was about 390 euros per inhabitant.

The retail sales of stores selling manufactured goods accelerated in December. The retail sales of those stores increased 11% in November compared to the corresponding month of the previous year, whereas in December the growth was 18%. Sales increased in all economic activities. Sales increased the most (46%) in other specialised stores, such as stores selling computers and their accessories, books, sports equipment, games and toys etc. A higher than average increase in retail sales occurred also in retail sales via mail order or the Internet (30% growth) and in stores selling second-hand goods and in non-store retail sale (stalls, markets, direct sale) (29% growth). In December, the retail sales in stores selling household goods and appliances, hardware and building materials and the retail sales in stores selling textiles, clothing and footwear which showed a small decline in November, turned to rise again and grew 8% and 5%, respectively, compared to the same month of the previous year.

The growth in grocery stores, which decelerated in November, accelerated again in December and sales increased 3% compared to December 2014.

The retail sales of automotive fuel increased 9% at constant prices compared to December 2014.

In December compared to November 2015, the retail sales in retail trade enterprises increased 24% at constant prices. This is a usual rise in December, when the Christmas and turn-of-the-year sales take place.

In December, the turnover of retail trade enterprises was 584 million euros, out of which the retail sales of goods accounted for 87%. Compared to December 2014, the turnover increased by 7% at constant prices. Compared to the previous month, this indicator increased 20%.

According to preliminary data, the retail sales of retail trade enterprises were approximately 5.2 billion euros in 2015. Compared to 2014 the retail sales increased 8% at constant prices.

Diagram: Retail sales volume index of retail trade enterprises and its trend

The statistics are based on the questionnaire “Turnover”, the deadline of which was 15.01.2016, and on the VAT declaration data from the Estonian Tax and Customs Board. Statistics Estonia published the monthly summary in 9 working days.

As of 2016, Statistics Estonia will start using only the VAT declaration data of the Estonian Tax and Customs Board and stop collecting data with the questionnaire “Turnover”. This will reduce the response burden of entrepreneurs and Statistics Estonia’s expenditure on data collection, and increase the use of administrative data. Due to the change in the data source, the monthly news release “Retail trade” will focus on the turnover of retail trade enterprises, instead of the retail sales of such enterprises (the first news release for 2016, “Retail trade, January 2016”, will be published on 02.03.2016). Statistics Estonia will continue publishing the retail sales indicator of retail trade enterprises on a quarterly and yearly basis.

Source: Statistics Estonia

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