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