Economic policy statement of Eesti Pank

The global economy continued to recover in the first half of 2010. This was reflected in the improvement in both economic activity and forecasts. However, government debts, which are soaring due to budget deficits, may pose a threat to further economic recovery and the functioning of financial markets.

Estonia’s exports have been driven by growing external demand and the flexibility of companies. Goods exports increased by a fifth year-on-year during the first four months of 2010. Looking ahead, companies have to step up productivity in order to expand their market share.

In order to restore employment, it is necessary to implement measures boosting the competitiveness of employees in the labour market. According to Statistics Estonia, unemployment hiked to 19.8% in the first quarter of 2010. Although it has become somewhat easier to find work, unemployment will remain high in the coming years. The need to increase productivity sets different requirements to labour force as well.

Domestic price growth must be kept in check by promoting competitiveness and conducting efficient competition supervision. Inflation picked up in the first half of 2010, reaching 3% in May compared to the previous year. This was caused by price increases in external markets and tax rises in Estonia. However, inflation due to tax rises (which were made to improve the budgetary position) is of one-off nature. If price increases in the external environment subside, inflation in Estonia will slow in the second half of the year.

Risks to the functioning of the Estonian financial system have shrunk during spring, while risks arising from the external environment have grown. The financial position of the Estonian exporting sector is on the mend and low key interest rates are contributing to the decline in debt servicing costs. . Nevertheless, since some euro-area countries are experiencing a government debt crisis, uncertainties have arisen in the external environment in recent months. If the external environment deterioration continues, it is possible that assessments of the funding possibilities of banks and of the materialisation of a credit risk, which have improved over the past half a year, will worsen again.

The banking sector is likely to post a profit this year, since banks are making considerably less provisions to cover possible loan losses. Improvement in the credit portfolio quality of banks will take time, depending on economic growth and on the labour market situation. The share of loans overdue by more than 60 days will be about 6% in 2010 and it will start to decline next year.

Credit market activity has primarily been affected by subdued demand, but lending may also be inhibited by the planned amendments to legislation. From the point of view of credit market developments and financial stability it is important that the new act regulating the restructuring of household debts would neither deteriorate the repayment discipline nor increase transaction costs related to debt liabilities.

If the ECOFIN’s decision on the adoption of the euro in Estonia is positive, preparations to gradually reduce the reserve requirement in Estonia will start in the second half of the year. Subsequent to the official accession decision, the current 15% reserve requirement will decline to 11% on 1 September and to 7% on 1 November. As from 1 January 2011, the reserve requirement will be 2% for liabilities with maturity below two years and 0% for liabilities with maturity over two years. Lowering the reserve requirement is not expected to bring along changes in banks’ risk assessments and credit conditions, since the financial strength of our banking groups is rather good. It is likely banks will use the reserves becoming available to reduce their external debt.

Source: Bank of Estonia

The prices of vegetables, heating oil and milk have increased the most

According to Statistics Estonia, the consumer price index increased 2.9% in August 2010 compared to August of the previous year and 0.0% compared to July this year.

Goods were 3.0% and services 2.8% more expensive compared to August of the previous year. Food products were 4.2% and manufactured goods 1.7% more expensive.

Regulated prices of goods and services have risen by 6.9% and non-regulated prices by 1.7% compared to August of the previous year.

Compared to August of the previous year, the index was mainly influenced by the 3.9% price increase of food and non-alcoholic beverages and by the 9.7% price increase of electricity, heat energy and fuels as a whole, both of which gave about a third of the total change; and by the 9% price increase of motor fuel. Compared to the same period of the previous year, the prices of fresh vegetables, heating oil and milk have increased the most (40%, 26% and 23.3%, respectively). But the prices of flour and white bread decreased (15.9% and 12.3%, respectively).

In August compared to July, the consumer price index was mainly influenced by the seasonal price decrease of fresh vegetables, by the increase in the expenditures on housing, step by step ending of the sales of clothing and footwear and by the price increase of tobacco products. Compared to the previous month, price of lemons increased the most (66.8%) and prices of paprika and tomatoes decreased the most (29% and 26.3%, respectively).

Change of the consumer price index by commodity groups, August 2010
Commodity group August 2009 –
August 2010, %
July 2010 –
August 2010, %
TOTAL 2.9 0.0
Food and non-alcoholic beverages 3.9 -1.0
Alcoholic beverages and tobacco 5.1 0.7
Clothing and footwear 1.2 0.2
Housing 4.8 0.7
Household goods -2.3 0.4
Health 0.8 0.2
Transport 3.1 0.0
Communications 7.2 0.0
Recreation and culture -0.1 0.1
Education 1.5 0.1
Hotels, cafés and restaurants -0.7 -0.5
Miscellaneous goods and services 0.1 0.8


Source: Statistics Estonia

The best Estonian enterprises are Ericsson Eesti and Tallink Grupp

In the evening of 7 September the winners of this year’s entrepreneurship awards were announced at the Estonia Concert Hall. The Entrepreneurship Award 2010 given by Enterprise Estonia (EAS) was awarded to Ericsson Eesti AS and in the Estonian Companies’ Competitiveness Ranking 2010 compiled by the Estonian Chamber of Commerce and Industry and the Estonian Employers Confederation the first prize was awarded to Tallink Grupp AS.

In addition to the two main awards, winners were announced in 6 award categories of the competitions and the most competitive companies were declared in 12 areas of business activities.

According to Ülari Alamets, Head of the Management Board of EAS, the activities of all the nominees of the Entrepreneurship Award are evidence to the fact that it is possible to be successful even during the current time. “All of you who have come out healthy and strong from the economic recession can congratulate yourselves. There is reason to be happy as was a character of Juhan Liiv: “Jaak, damn it, my feet touch the bottom!”,” said Alamets in his speech to the entrepreneurs. “The main award was given to Ericsson Eesti AS that took over a part of the production of Elcoteq, was able to increase export and is impressive in terms of additional value per employee, furthermore, brought new products to the market and showed decent business revenue,” said Alamets about the winner.

The aim of organising the Entrepreneurship Award competition is to give the state’s recognition to successful Estonian companies and to improve awareness of entrepreneurship. The best of the award categories were selected by experts of different areas of activity, the winner of the main award was selected by a high-level panel lead by the Minister of Economic Affairs and Communications Juhan Parts.

Developer of the Year 2010 was awarded to Polarwerk OÜ that provides construction, repairs and maintenance services on railways and has been able to perform more and more complicated works and participate in procurements as the main contractor.

Innovator 2010 was awarded to Massi Miliano OÜ that created the virtual fitting room or the robot mannequin meeting the measurements of the person that will help trying the suitability of clothes when buying from e-shops.
Exporter 2010 was awarded to Wendre AS that is a company with high export turnover, which was able, unlike many other large exporters, to increase its export in 2009, invested in new technologies and brought new products to the market.

Foreign Investor 2010 was awarded to Ericsson Eesti AS that took over a part of the production of Elcoteq and added production of 4G network devices.

Tourism Innovator 2010 was awarded to Maarja Magdaleena Gild NGO that is an integral creative centre joining artists and artisans of Pärnu and has 18 masters halls offering the visitors active holidays and experiential tourism, supports strongly preservation and vitality of the local crafts traditions, and is involved in organising the Pärnu Gild Days, advent events and Christmas fair.

Additionally, this year has one new category, Design Applier 2010 that was awarded to Balteco AS, which as the biggest bath tub manufacturer in Northern Europe uses the creations of Estonian designers Toomas Kelder, Matti Õunapuu, Tiit Liiv, Tõnis Krikk, Harri Erlich and Sven Sõrmus for designing its products.

The aim of the Competitiveness Ranking is to find out the most competitive companies, offer the companies a possibility for comparing themselves against other companies of their kind and to assess success, productiveness and sustainability of Estonian companies. The competitiveness ranking is compiled as a general table, for small and medium-sized enterprises and by areas of activity in 12 categories.

The title The Most Competitive Enterprise 2010 was awarded to Tallink Grupp AS that won before Mažeikiu Nafta Trading House that gained second place in the general ranking of competitiveness by 1.5 percent. The sales revenue and investments of Talllink Grupp are without competition the highest in the competitiveness ranking of 2010.

The following companies were winners by areas of activity:

BLRT Grupp AS – the most competitive industrial and energy enterprise 2010;
A. Le Coq AS – the most competitive food industry enterprise 2010;
Humana Sorteerimiskeskus OÜ – the most competitive retail enterprise 2010;
Mažeikiu Nafta Trading House OÜ – the most competitive wholesale enterprise 2010;
DenEesti OÜ – the most competitive tourism enterprise 2010;
Riigi Kinnisvara AS – the most competitive business service and real estate enterprise 2010;
AS Vopak E.O.S. – the most competitive transport and logistics enterprise 2010;
Merko Ehitus AS – the most competitive construction enterprise 2010;
EMT AS – the most competitive communication and IT-services enterprise 2010;
Markilo OÜ – the most competitive agriculture and forestry enterprise 2010;
If Eesti Kindlustus AS – the most competitive financial brokerage enterprise 2010;
AS G4S Eesti – the most competitive service enterprise 2010;
Rentest OÜ – the most competitive small and medium-sized enterprise 2010.

In total 342 Estonian companies participated in compiling the Competitiveness ranking 2010, 325 of which qualified for the final ranking according to methodology. Participation in the ranking was voluntary.

Furthermore, Estonian Management Quality Award 2010 was awarded, which in the category of large companies was given to Enics Eesti AS.

In addition to that, award Recognize Promoters of Enterprise 2010 was given to, an English-language web environment founded and managed by Eesti Ekspress journalist Toivo Tänavsuu, which introduces Estonian technology companies, key persons and achievements.

Best Student Company 2010 is Pääsuke (Rolling Art) from Tartu Art High School.

Swedbank’s special award for innovative exporter was given to Mobi Solutions.

All information regarding the entrepreneurship competitions and results is available at the portal

Source: Enterprise Estonia