Industrial production increased in March

According to Statistics Estonia, in March 2010 the production of industrial enterprises rose 12% compared to March of the previous year.

In March 2010 the production in manufacturing increased 11% compared to March of the previous year. When in total of 2009 compared to the previous year, the production decreased in all branches of manufacturing, then in January 2010 some branches showed recovery marks. In February and March a considerable growth could be observed in more than half of branches. When in March the export sales in manufacturing increased 23%, then the domestic sales fell 6% compared to March of the previous year. The rapid increase in production was partly affected by the low reference base in 2009, while at the beginning of 2009 the production was the lowest. In March 2010, among the branches holding bigger share, the production increased in manufacturing of electronic products (89%) and in manufacturing of wood (21%). The production increased considerably also in some smaller branches, as the manufacturing of motor vehicles, metals, refined petroleum, chemical and plastic products and building materials, mainly due to the increase of exports. The production of wearing apparel and leather decreased more than a fifth. Less than 10% was the decrease in manufacture of paper, metal products, machinery and equipment and in repair and installation of machinery and equipment. The main reason causing the decline was insufficient domestic demand.

In March 2010 compared to February, the seasonally adjusted industrial production increased 4%, the production of manufacturing rose 3%.

In March 2010 compared to March 2009, the production of electricity increased 31%, the production of heat — 5%. The increase in energy production was caused mostly by the increase in exports, as well as by a rising demand for energy induced from active manufacturing.

The volume index and trend of production in manufacturing, January 2000 – March 2010 (2005 = 100)

Diagram: The volume index and trend of production in manufacturing, January 2000 – March 2010 (2005 = 100)

Read more from Statistics Estonia

Retail sales remained in decline

According to Statistics Estonia, in March 2010 compared to March of the previous year the retail sales of goods of retail trade enterprises decreased 9% at constant prices. Since the beginning of the year the decrease in retail sales has been relatively stable compared to the same month of the previous year.

In January the retail sales of goods decreased 11% and in February 10% compared to the same month a year ago. In March, the retail sales of goods of retail trade enterprises were 4.3 billion kroons. Compared to March 2009, the retail sales of goods increased in three economic activities: the retail sales of food, beverages and tobacco in specialized stores (44%), the retail sales of second-hand goods in stores (11%) and in stores selling pharmaceutical goods and cosmetics (5%). The very low reference base in 2009 contributed to the sales growth of the retail sales of foods, beverages and tobacco in specialized stores. The sales increase in these stores does not significantly influence the retail sales of goods of retail trade enterprises, because the share of this economic activity is very small, 2% in March 2010. The decrease in retail sales of goods was most influenced by the stores selling manufactured goods, where the retail sales decreased by 15% compared to March 2009. The retail sales of stores selling household goods and appliances, hardware and building materials decreased most or 27%. The decrease in non-specialized stores with industrial goods predominating and in stores selling textiles, clothing, footwear and leather goods slowed down more compared to the previous months. In these stores the retail sales of goods decreased 8% during the year, which was one of the smallest decreases over the last one and a half year.

In March, the decrease in grocery stores also slowed down to some extent. If in January and February the retail sales in these stores decreased 6% compared to the same month of the previous year, then in March the decrease was 4%.

Compared to the previous month, the retail sales in retail trade enterprises increased by 13% in constant prices. According to the seasonally and working-day adjusted data the retail sales decreased by 1%.

In March the revenues from sales of retail trade enterprises were 5.3 billion kroons, out of which retail sales of goods accounted for 82%. Compared to March of the previous year, the revenues from sale decreased by 3% at current prices. Compared to the previous month, this indicator increased 14%.

Retail sales volume index of retail trade enterprises and its trend, January 2002 – March 2010 (2005 =100)

Diagram: Retail sales volume index of retail trade enterprises and its trend, January 2002 – March 2010 (2005 =100)

Source: Statisics Estonia

9 000 Estonians live in Australia

During his meeting early this morning in Tallinn with Australian Foreign Minister Stephen Smith, Foreign Minister Urmas Paet emphasised that the fifth largest community of Estonians lives in Australia (after Canada, Sweden, the United States, and Finland). “In recent years a considerable number of young Estonians have worked in Australia on work or vacation visas. There are nearly 9 000 Estonians in Australia,” said Paet. “To help our citizens living in Australia and to resolve issues related to social security and health insurance, we will continue active negotiations with Australia for concluding a bilateral social security agreement,” stated Paet.
Paet also told his Australian colleague about Estonia’s desire to intensify communication between Australian and Estonian entrepreneurs. “Estonia’s accession to the Organisation for Economic Co-operation and Development (OECD) and the euro zone will certainly make investing in Estonia more attractive,” noted Paet.
Both Estonia and Australia contribute to military activity and reconstruction work in Afghanistan. Paet stressed that Australia is the biggest non-NATO contributor to the International Security Assistance Force in Afghanistan. “The exchange of information and co-operation with Australia in the southern part of Afghanistan are valuable to Estonia,” said Paet. “Estonia works in Helmand Province, and Australia is also there in addition to Oruzgan Province and Kandahar,” Paet remarked.

Source: Estonian Review

Estonia 12th most innovative among EU27

According to the newly published final report of the European Innovation Scoreboard (EIS), Estonia has risen to 12th place for its innovation in 2009.

With this ranking, Estonia is positioned along with Austria, Belgium, Cyprus, France, Ireland, Luxembourg, the Netherlands and Slovenia in the innovation followers group, which is only one step down from the innovation leaders group.

In first place on the Innovation Scoreboard for 2009 is Sweden, followed by Finland and Germany. Great Britain and Denmark also belong to the leader group. Estonia is trailed in the scoreboard by the Czech Republic, Italy, Spain and Portugal. Latvia is in the second-to-last position on the scoreboard.

Estonia’s success has been supported primarily by the increased readiness of companies to invest and the increase in utilizing innovation. While on the 2008 scoreboard Estonia was still below the EU average with its innovation indicators, according to this year’s indicators Estonia has surpassed the average.

“This is an outstanding outcome, because in the 2007 final report it was predicted that it would take 10 years for Estonia to reach the middle group,” said press spokesperson for the Ministry of Economics and Communications Piret Järvis.

In compiling the EIS, indicators regarding educated and skilled human resources are observed and compared among nations. The state’s activeness in supporting innovation and other opportunities for innovation are observed, as are the readiness of companies to invest in innovation and the readiness of businesses to co-operate in the name of innovation amongst themselves and with the public sector. A score is also given regarding intellectual property.

The number of companies that have brought innovative products or introduced something innovative within the company is also observed. A score is also given for how much innovation has affected economic development, for example in creating jobs or influencing export.

The European Innovation Scoreboard has been compiled since 2001. The scoreboard observes the innovation indicators of all 27 European Union member states.


Estonia opened a consulate in Shanghai

During the opening of the Estonian Consulate in Shanghai, China, Foreign Minister Urmas Paet noted that this step would help to advance Estonia-China economic relations and co-operation and make consular aid more accessible. The Estonian consul in Shanghai is Andre Lipand.

Paet stated that with the opening of the consulate in Shanghai, the Foreign Ministry would like to help develop the contacts of Estonian entrepreneurs in China and other Asian nations and introduce Estonia on a broader scale. “Estonian entrepreneurs are interested in China and we wish to utilise to the fullest extent the opportunity to introduce Estonia. Finding information is essential to advancing business contacts, and our representations in China can provide help with this,” said Foreign Minister Paet.

“The Estonian Consulate will help contribute to developing economic relations during the World Exposition of the Shanghai Expo and afterwards as well,” asserted Foreign Minister Paet. China is one of the most important economic forces in the world, and its predicted economic growth for 2010 is more than 9%. The European Union is the biggest market for Chinese goods.

Paet stated that the opening of the consulate will make consular services and aid more accessible to people living and travelling in that region.

The expenses involved in opening and running the consular representation will be covered in co-operation with Enterprise Estonia. An Enterprise Estonia representative will work in the same space.

Source: Estonian Ministry of Foreign Affairs

Electricity comes from Finland via undersea cable

After the launch of the Estonian electricity exchange at the beginning of April, deals were transacted for the first time last week that sent electricity moving from Finland to Estonia via the Estlink submerged power cable on the bottom of the Gulf of Finland.
“By way of exception, the bottom line for the Estlink price area had been laid by electricity providers of the Helsinki area when on Sunday night the price in both the Helsinki and Estlink price areas was 20 euros per megawatt-hour during two hours and electricity was physically supplied from Finland to Estonia,” Margus Vals, director for energy trade at the Estonian state owned power utility Eesti Energia, said.
In the Estlink price area (Estonian electricity exchange) the price remained the same from 2 a.m. till 9 a.m. Sunday. In all 40.2 megawatt-hours of electricity was imported to Estonia from Finland. During the week, 30.9 gigawatt-hours of electricity was bought and 71.8 gigawatt-hours sold in the Estlink price area. Export to Finland declined by 1.3 gigawatt-hours to 41.0 gigawatt-hours.
The price of electricity on the exchange for the Estonian market area dropped on the average 7.3% last week to 34.24 euros per megawatt-hour. On nearby markets the decline was smaller, being 3.3% in both the Helsinki area and in Lithuania.

Source: Estonian Review

RMK plants 10 million trees this spring

The state forest management company RMK has started the spring planting of trees in the course of which it plans to put more than 10 million tree plants in the ground all over Estonia.
In all, 6 500 hectares of state forest will be rejuvenated, with young trees to be planted on 4 500 hectares, seeds sown on 1 500 hectares, and 500 hectares prepared for natural rejuvenation.
Tavo Uuetalu, board member of RMK, said that the planting of young trees was already underway in some places of Estonia, whereas in others more time was needed for the ground to dry up enough after the melting of snow. “By the end of May 5.8 million spruces, 3.6 million pines, 670 000 birches and a few oak groves should have been put in the ground,” Uuetalu said.
Uuetalu added that residents in rural areas have displayed great interest in signing up for the work this year, therefore no public campaign is needed. RMK manages 38% of Estonia’s forests.

Source: Estonian Review

The construction price is falling

According to Statistics Estonia, in the 1st quarter of 2010 the percentage change of the construction price index was -7.1% compared to the 1st quarter of 2009. The construction price index fell for five quarters in succession.

The fall of the construction price index in the 1st quarter was mainly influenced by the decrease in the labour costs. The price indices of building machines and building materials are also in the falling trend.

In the 1st quarter of 2010 compared to the 4th quarter of 2009, the change of the construction price index was -1.1%, mainly influenced by the decrease in the labour costs.

In the 1st quarter of 2010 the percentage change in the repair and reconstruction work price index was -1.1% compared to the 4th quarter of 2009 and -6.9% compared to the 1st quarter of 2009.

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

Change in the construction price index, 1st quarter 2010
  4th quarter 2009 –
1st quarter 2010, %
1st quarter 2009 –
1st quarter 2010, %
TOTAL -1.1 -7.1
labour force -2.8 -13.1
building machines 0.0 -2.7
building materials -0.5 -5.0
Index of detached houses -0.9 -6.2
Index of blocks of flats -1.1 -7.1
Index of industrial buildings -1.0 -7.0
Index of office buildings -1.1 -7.4


Change in the repair and reconstruction work price index, 1st quarter 2010
  4th quarter 2009 –
1st quarter 2010, %
1st quarter 2009 –
1st quarter 2010, %
TOTAL -1.1 -6.9
labour force -2.3 -12.6
building machines 0.7 0.0
building materials -0.8 -4.4

Source: Statistics Estonia

The economy has begun to recover

Global economic growth is on the mend and confidence in the international financial system has remarkably improved compared to a year ago. Nevertheless, there are uncertainties regarding the speed and dynamics of the recovery. Extensive fiscal policy stimuli and central banks’ lenient monetary policy continue to support confidence and demand. At the same time, several countries are facing the issue of the sustainability of their fiscal policy and government debt burden. In Estonia, economic stabilisation has so far been mainly driven by external demand, with the sectors oriented to domestic demand displaying only limited signs of a rebound.

In the short term, economic growth will largely be based on the revival of production activity. 2009 was a year of reviewing earlier plans for many enterprises and households as well as for the public sector. Adjustment is almost over in many companies and this has contributed to the improvement of confidence. Uncertainties regarding the near-term growth profile stem from the speed at which the underutilised capacity will be put to use. If growth resumes faster than expected, it should not be viewed as a return to a steady state, since investment activity has not yet recovered.

Irrespective of the recovering economy, unemployment is likely to remain high even at the end of the forecast horizon (i.e., in 2012), exerting a drag on the restoration of domestic demand. Unfortunately, long unemployment spells deteriorate people’s working habits, impair their professional skills and reduce their productivity. Rising structural unemployment may in future affect the level of GDP and undermine the growth potential. Thus, considerable efforts should be made in the next years to reduce structural unemployment.

The fact that the sharp decline in the relative income level in Estonia has not been accompanied by a notable change in the relative price level will ease inflationary pressures over a longer period of time. The pass-through of declining wages to prices has been limited. The most serious upward risk to inflation is commodities price rise in the global market, and it will have a stronger impact on the consumer basket in Estonia than in more developed countries. Compared to the autumn forecast, consumer prices are now expected to increase more as a result of additional tax increases, higher oil prices and other external factors, whereas inflation will remain low relative to the boom years. Upward price pressures are alleviated by weak domestic demand and excessive underutilised capacity. Since price growth may inhibit economic recovery, inflation stemming from pricing in monopolistic public utility companies should remain contained.

In order to give impetus to growth, banks should provide sufficient support to the economy. Compared to the rapid growth period, a large share of the Estonian banking sector has become considerably more conservative in supplying credit. In the light of the accrual of overdue loans, banks mostly focused on dealing with the existing loan portfolio in 2009. With the economic situation improving and banks’ financing costs declining, there is now enough room to ease credit conditions. In addition, last year’s amendments to capital regulations have released more capital, which should also support bank lending in the new growth cycle. At the same time it is important to avoid taking legislative steps which might ease debt restructuring at the cost of more expensive lending.

The general government will have to continue fiscal consolidation in the years to come. The government’s decisive action in 2009 stopped further deterioration of the consolidated budget. Although the objective of starting to run surpluses again by 2013 is strongly recommended, Eesti Pank’s forecast is of the opinion that economic resumption alone does not lead to growing out of the deficit. It is necessary to take additional measures, especially in the light of the termination of one-off fiscal consolidation measures. Cost-cutting should be preferred to other measures due to the notably increased tax burden. The easiest step would be to freeze the level of expenditure.

See the TABLE of Economic forecast by key indicators

Source: Bank of Estonia

Macedonia and Albania open embassies in Tallinn

Foreign Minister Urmas Paet met with his Macedonian* colleague Antonio Milošoski and Albanian Foreign Minister Ilir Meta in Tallinn. Milošoski and Meta affirmed that each nations plans to open an embassy in Tallinn in the near future.
At his meeting with Paet, Macedonian Foreign Minister Antonio Milošoski confirmed that an embassy would be opened soon and that there was interest to use Estonia’s experiences to help prepare Macedonia for European Union accession. Paet stated that Macedonia has Estonia’s complete support. “According to the 2009 progress report, Macedonia has succeeded in implementing all the legislative changes dictated by the European Commission. This is a commendable accomplishment. It is also significant that Macedonia achieved visa freedom with the European Union at the end of last year,” he added.
Within the framework of their meeting, Urmas Paet and Antonio Milošoski signed the implementing protocol for the agreement on the readmission of illegal immigrants between the two nations.
During the meeting of the Estonian and Albanian ministers in Tallinn, Albanian Foreign Minister Meta stated that Albania has decided to open an embassy in Estonia.
Foreign Minister Paet said that Estonia also supports the EU-related development of Albania and the implementation of visa freedom between the European Union and Albania. “The agreement on the avoidance of double taxation recently signed between Estonia and Albania gives momentum to the development of economic relations. An agreement for the protection of investments should be concluded as well,” he asserted.
Paet added that Albania, as a new member of NATO, plays an essential role in ensuring stability in the Western Balkan region and Europe as a whole.

* Former Yugoslav Republic of Macedonia

Source: Estonian Review