2011 was successful for Estonian industry

According to Statistics Estonia, in 2011 the production of industrial enterprises grew 18% compared to the previous year. The growth of production was mainly influenced by the external demand, but the domestic demand also increased continually during the year.

The rapid growth in production when the production grew steadily more than 20% compared to the same month of the previous year, continued till August 2011. Since September the growth in manufacturing slowed down considerably. At the end of the year, the main reason for the slowdown was deceleration of the economic growth in the European Union countries, which caused lower demand for the Estonian products, as well as essentially higher comparison basis. In 2011, the production in manufacturing increased 22% compared to previous year and the production of energy decreased 3% due to the decrease of heat production.

The production in manufacturing grew mainly due to the increase in exports. More than 70% of the whole production of manufacturing was sold on the external market. Export sales of the manufacturing production grew more than a third (36%) compared to 2010. The demand on the domestic market was lower – in 2011 domestic sales increased over a tenth (14%) compared to the previous year. However, the growth in the demand on the domestic market was faster than on the external market during the last quarter of 2011. In 2011, the production exceeded the volume of the previous year in most branches. The growth in the production of manufacturing was most influenced by the branches holding bigger shares – manufacturing of electronic products where the production increased by two times compared to 2010, and manufacturing of wood and metal products where the production grew 12% and 16%, respectively. With respect to the branches of manufacturing holding smaller shares, the production increased considerably in the manufacturing of machinery and equipment, electrical equipment, chemicals and motor vehicles.

In December 2011, the production of industry decreased 3% compared to December of the previous year; mainly due to the fall in energy production. In December compared to December 2010, the production of electricity decreased 13% and the production of heat 34%. The production of manufacturing grew 1%.

In December 2011 compared to November, the seasonally adjusted industrial production fell 1%; the production of manufacturing grew 1% during the month.

Volume index trends of production in manufacturing in the European Union, January 2002 – December 2011 (2005 = 100)

Diagram: Volume index trends of production in manufacturing in the European Union

Read more from Statistics Estonia

Retail sales up 4 pct last year

Statistics Estonia said that its preliminary data showed that the retail sale of retail sale companies was nearly 3.9 billion euros, 4% higher in stable prices compared with 2010. Starting from February retail sale has been showing stable growth compared with last year, the statistical office said in its information.

In December the retail sale of retail sale companies totalled 389.1 million euros. Growth in retail sale was influenced the most by grocery stores where retail sale grew 7% compared with December 2010. Retail sale in stores of manufactured goods grew 6% compared with December, with sales increasing in most spheres of activity. Retail sale of motor fuel contracted 3% compared with December 2010.

Compared with November 2011, the sale of retail goods in retail trade companies grew one fifth in stable prices. This is a usual December rise when the year-end Christmas sales take place, Statistics Estonia said. On the basis of seasonally and working day based data the growth was 1%.

Source: Statistics Estonia

Share of renewable energy up

Energy output from renewable sources was 12.9% last year, according to figures released by the transmission system operator Elering – a 3.2 percentage point increase from a year ago and over double the 2009 level. Electricity made from waste and biomass led all renewable sources.

The renewable energy output was 1160 gigawatt hours as of the end of 2011 and the absolute figure was 35% higher than at the end of 2010, mainly due to greater biomass, biogas and wind power generation. The breakdown was 66% from waste and biomass, 31% from wind, and 3% from hydroelectric sources. Of the total, 1066 gigawatt hours was covered by subsidies, representing a 40% increase in the subsidised renewable energy volume. Subsidies disbursed totalled 57.2 million euros.

Although Elering director Taavi Veskimägi said he welcomes the rapid growth of generation from renewable sources, he stressed the need to review the subsidy schemes – ideally by 1 January 2013, when the fixed prices of power for home consumers are abolished. He said it would be “proportional toward the justified expectations of producers and consumers” for producers to essentially hand back to consumers some of the extra revenue they will stand to make when prices are no longer artificially low in 2013.

“The whole burden of increasing energy costs cannot be placed on consumers. Today consumers pay close to 10 % of their invoice on renewable energy fees,” said Veskimägi. “Considering the current renewable energy figures, the set national renewable energy goals can be achieved in a manner much less burdensome for consumers.”

Source: Estonian Review

Cereal production grew 14 pct in 2011

Estonia’s cereal production in 2011 amounted to 771 900 tons, 14% more than in the preceding year, preliminary figures released by Statistics Estonia show.

The production of wheat, barley and rye increased year on year. Of total cereal output, wheat made up 360 400 tons, barley 294 400 tons and rye 30 900 tons. The sown area of cereals was 297 200 hectares, an 8% bigger area than in 2010. The sown area of wheat was 128 500 hectares, the largest such figure in the last thirty years. The sown area of barley increased the most, by 13%, and amounted to 118 100 hectares. In spite of that, the sown area of barley was the smallest during the last thirty years with the exception of 2010.

The yield of legumes was 15 500 tons and the average per hectare yield was 1 807 kilograms. Legumes were sown on 8 600 hectares, which is the largest sown area of legumes in the last three decades.

The size of the potato crop in 2011 was 150 900 tons, 8% less than in 2010. Three years ago the sown area of potatoes dropped under 10 000 hectares and it comprised 9 300 hectares in 2011. The average yield of potatoes was 16 284 kilograms per hectare.

In the autumn of 2011, 52 700 hectares of winter wheat, 12 200 hectares of rye and 4 700 hectares of triticale were sown for harvesting in 2012.

Source: Estonian Review

Banks’ profitability was supported by a decline in loan write-downs

In December 2011, new corporate lending was the highest of the year, due to some single large-scale projects. Whereas the turnover of short-term loans and leasing remained at its usual level, that of long-term loans and leasing was about a third larger, amounting to more than 250 million euros. Owing to the pickup in lending, the corporate loan portfolio increased month-on-month, reaching 7.1 billion euros by the end of December. Meanwhile, the corporate loan and leasing portfolio decreased by 5.9%, year-on-year.

The household loan portfolio decreased by 2.6%, year-on-year, in December, whereas the stock of existing loans kept shrinking throughout 2011. Different from corporate credit turnover, household credit turnover has been on the decline since September, reflecting changes in the economic environment in the last quarter of 2011.

The euro-area sovereign debt crisis has increased loan interest margins on both corporate and household loans. Interest margins grew in both November and December, whereas the base rate, the 6-month EURIBOR, declined slightly. The interest margin on corporate loans rose to 2.7% and on housing loans to 1.8% in December.

The loan portfolio quality improved markedly in December, when the share of loans overdue by more than 60 days decreased by half a percentage point, to 4.8%, reaching the level of spring 2009. The loan portfolio quality improved across almost all sectors, mostly due to the write-off of uncollectible loans, but also owing to the rapid economic growth of 2011.

Corporate and household deposits increased to 7.9 billion euros in December. While in earlier months, deposit growth was driven by household savings, December saw a larger increase in corporate deposits. Year-on-year, total bank deposits have increased by 6.6%, household deposits by 10.6% and corporate deposits by 2.2%.

Banks’ net interest income decreased by about 4 million euros in the fourth quarter, mostly due to the ongoing shrinkage in the loan portfolio. In 2011 as a whole, banks earned net interest income in the amount of 380 million euros, about 21% more than in 2010. Interest income was supported by an increase in the reference interest rates, which lasted until the fourth quarter.

Banks’ net profit amounted to 97 million euros in the last quarter of 2011, which is 3.3 times more than in the fourth quarter of 2010. As a total of 2011, banks earned 633 million euros of net profit of which 51% was extraordinary financial income arising from a commercial bank’s structural changes. Reduction in the loan write-down reserve has supported profitability over the past five quarters. This has taken place along with the improving loan portfolio quality accompanying economic growth. Loan write-downs decreased by 5.5 million euros in the fourth quarter and by 18.8 million euros during the year.

Author:  Jaak Tõrs, Head of the Financial Stability Department of Eesti Pank

 Read more from Bank of Estonia

Estonian Air to replace new Bombardiers with Brazilian aircraft

Estonian national carrier Estonian Air has received permission from the ministry of economy to replace the new Bombardiers that the airline acquired recently with cheaper planes made by Brazilian aircraft manufacturer Embraer.

It has been only a year when Estonian Air was handed over three new Bombardier aircraft. The airline needed new planes badly since it was in the process of removing the Saab turboprops from service and closing the lease of Boeing aircraft.

The airline also announced that it was negotiating purchase of three other Bombardier aircraft. However, when the Canadian manufacturer who knew that the airline was in dire need of new aircraft started to set demands, most of which were unacceptable, the airline’s management with the approval of the economic minister Juhan Parts started to look around for an alternative.

It found it in Embraer, a Brazilian aircraft manufacturer that was able to offer a much wider choice of aircraft. Embraer is the world’s fourth largest aircraft manufacturer, one place behind Bombardier. Embraer, however is world leader in the segment of regional aviation and this is what makes it so interesting for Estonian Air.

Read more from BBN

Two million people live in Latvia, 190 000 have emigrated

On 18 January, the Latvian statistics bureau Centrala statistikas parvalde released the preliminary results of the 2011 national census. It shows that 2 067 887 people lived in Latvia at the time of the census, thus still slightly making it above the 2m mark.

From the last census in 2000, the number has shrunk by 309,000 or 13%. 119,000 have been lost due to the negative birth rate and another 190,000 due to emigration. 1.3m or 64% are of working age, 14.1% below the working age and 21.8% above it.

Source: BBN

Risk fund leaves investors with nothing

Buyers of units of Gild Arbitrage, Estonia’s first risk fund, are likely to lose all of their investment since the units are worthy nothing and the fund’s liabilities exceed its assets which include a few lots in Armenia that may or may not have gold or copper reserves.

The fund was founded ten years ago by former fund manager Tõnno Vähk and Tõnis Haavel, former partner of Gild Bankers. Another partner of Gild Bankers, Rain Tamm, was also actively involved.

The three that are still investors in the fund have put Tõnu Pehk in charge. Pehk has made attempts to revive the fund, but is now losing hope as the net asset value of the fund is zero.

Fund’s creditors have received about half of their investment, but unequally since some bond holders had collateral, while most did not.

Read more from BBN

The population of Estonia is 1,316,500

According to Statistics Estonia, by preliminary data, the population number in Estonia was 1,316,500 on 1 January 2012. The decline in the estimated population in 2011 was influenced by the decrease in the number of births as well as by the increase of emigration.

14,713 live births were registered in 2011, i.e. 1,112 births less than in the previous year. The number of births fell to the 5-year-ago level, when less than 15,000 children were born per year. 15,226 persons died in 2011, i.e. 564 less than in the previous year. Although the number of deaths has decreased constantly over the last four years, a large drop in the number of births in 2011 took the natural increase which had turned slightly positive in 2010 back to negative again. Natural increase is the difference between live births and deaths during the year. Positive natural increase shows the predominance of births and negative natural increase – the predominance of deaths. In 2011, the number of deaths exceeded that of births by 513 persons.

The estimated population declined also due to negative net migration. By preliminary data, in 2011, 3,922 persons more emigrated than immigrated which is the last decade’s biggest difference between immigrants and emigrants.

5,543 marriages were contracted and 3,108 marriages were divorced which is correspondingly 477 and 194 more than in 2010.

Births, deaths, natural increase and net migration, 1990–2011

Diagram: Births, deaths, natural increase and net migration, 1990–2011

Statistics Estonia will publish the revised preliminary population number as of 1 January 2012 on 16 March 2012. The estimated population number is based on the 2000 Population and Housing Census data which are supplemented with the annual data on registered births, deaths and migration. It differs from the population number of the Population Register where the data are based on the registration of a person’s place of residence. Internationally, the Census data are considered more accurate than the Register data, because people may have different reasons for alteration of data while registering their place of residence. At the same time the long period of time since the last Census deteriorates the data of Statistics Estonia.

Statistics Estonia will publish the preliminary population number of the 2011 Population and Housing Census (PHC 2011) at the end on May and the final number in December 2012. After that population accounts will be revised.

PHC 2011 is going to take place from 31.12.2011 to 31.03.2012 and it will be conducted using a combined method: from 31.12.2011 to 31.01.2012 permanent residents can fill out the Census questionnaire over the Internet and those who do not use the e-Census option will be interviewed by the enumerator at home from 16.02 to 31.03.2012.

Source: Statistics Estonia

Construction price index increased 3.1 pct in 2011

According to Statistics Estonia, the construction price index increased 3.1% in 2011 compared to the average of 2010, of which labour force 7.6%, building machines 2.0% and building materials 1.5%.

The change of the construction price index was 2.0% in the 4th quarter of 2011 compared to the 3rd quarter and 4.5% compared to the 4th quarter of 2010. Compared to the 4th quarter of 2010, the construction price index was mainly influenced by more expensive labour force, which gave almost two thirds of the total increase. Compared to the 3rd quarter of 2011, the impact of the labour force was even bigger and gave over 70% of the quarterly change.

The repair and reconstruction work price index increased 3.8% in 2011 compared to the average of 2010, of which labour force 7.5%, building machines 4.3% and building materials 1.9%.

The percentage change of the repair and reconstruction work price index in the 4th quarter of 2011 was 2.7% compared to the 3rd quarter and 5.8% compared to the 4th quarter of 2010.

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 construction price 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

4th quarter 2011

  3rd Q 2011 –
4th Q 2011, %
4th Q 2010 –
4th Q 2011, %
TOTAL 2.0 4.5
labour force 5.5 11.2
building machines 0.4 3.3
building materials 0.7 2.0
Index of detached houses 2.6 5.4
Index of blocks of flats 2.0 4.7
Index of industrial buildings 2.0 4.4
Index of office buildings 1.9 4.1


Change in the repair and reconstruction work price index, 4th quarter 2011
  3rd Q 2011 –
4th Q 2011, %
4th Q 2010 –
4th Q 2011, %
TOTAL 2.7 5.8
labour force 6.0 11.5
building machines 0.6 5.5
building materials 1.2 3.0
Source: Statistics Estonia