Logging grew 3 pct in 2011

The volume of logging in Estonian forests grew 3% year-on-year in 2011 to 10.77 million cubic meters and the area of felling increased 4% to 136 177 hectares, figures provided by Statistics Estonia show.

Felling in state forests totalled 3.63 million cubic meters, up by almost 9% in annual comparison, whereas in private forests it declined by slightly less than one percentage point to 6.94 million cubic meters.

Clear cutting accounted for 7.96 million euros and improvement cutting for 2.33 million cubic meters of last year’s felling.

Reforestation was carried out on 9 578 hectares last year, including new planting on 7 129 hectares. Some 4 775 hectares of land was planted with spruce, 1 732 hectares with pine, and 583 hectares with birch.

Source: Estonian Review

Activities that make tax authority suspicious

Äripäev writes that there are certain company activities or decisions that are likely to raise the interest of the tax authority. An analysis of the operating principles of the tax authority shows that the system  is working like a computer program.

Of course, if companies submit their tax reports in time and pay the tax by due date, they can be fairly certain that they will escape any major scrutiny. 

However, this may not apply if the company is operating in the wholesale trade, construction, service, catering and fuel sector because, according to the tax authority, these are the areas where unreported income, ie cash, is the biggest, and has decided to take it under major scrutiny this year.

Read more: BBN

Economic growth decelerated in the 1st quarter

According to the second estimates of Statistics Estonia, the gross domestic product (GDP) of Estonia increased by 3.6% in the 1st quarter of 2012 compared to the same quarter in the previous year. The GDP growth decelerated for the second quarter in succession.

The seasonally and working-day adjusted GDP increased by 0.3% compared to the 4th quarter of 2011 and 3.7% compared to the 1st quarter of 2011.

Compared to the period preceding the economic recession the seasonally and working-day adjusted GDP in the 1st quarter of the current year had arisen to the level of the 1st–2nd quarter of 2008 in nominal terms and approximately to the level of the 2nd quarter of 2006 in real terms.

In the 1st quarter, the fast growth of the value added in construction, trade, information and communication activities contributed the most to the GDP growth. The growth in construction was supported mainly by the repair and reconstruction work of buildings. The fast growth of information technology and telecommunication services had the biggest impact on the growth of the value added of information and communication. Retail trade contributed the most to the GDP growth in trade activities.

The value added decreased in manufacturing, real estate activities and in health care. The decrease in the production of computers, electronic and optical products inhibited the GDP growth the most.

Growth of the value added of economic activities, 1st quarter 2012

Diagram: Growth of the value added of economic activities, 1st quarter 2012

Export growth of goods and services decelerated to 7%, with the export growth of goods also decelerating to 7%. Import of goods and services increased by 10%, with import of goods growing by 9% and import of services by 14%. If earlier Estonian foreign trade was mainly influenced by the fast growth of import and export of computers, electronic and optical products, the growth of these goods was replaced by a decrease since the last quarter of the previous year and other machinery and equipment have now the biggest contribution. Export of services increased 6%, contributed mainly by the services of professional, scientific and technical activities and services of warehousing and support activities for transportation. Import of services was influenced the most by the fast growth of construction services. In spite of the deceleration of export and import, their share in the GDP increased to the level of 92% and 93%, respectively. The share of import of services increased especially fast. The share of net exports in the GDP was -0.5%. Import exceeded export last in 2008.

In the 1st quarter the GDP both at current and constant prices increased faster than the amount of hours worked compared to the same quarter of the previous year – by 5% in nominal terms and by 2% in real terms. The growth of labour productivity per hour worked was the fastest of the previous one and a half year. At the same time labour costs for the GDP production have increased. Unit labour costs have increased by 4% compared to the same quarter of the previous year, which indicates that the compensations per employee have grown faster than productivity. The growth of the unit labour costs was the fastest of the previous two and a half years.

The growth of the domestic demand decelerated to 1.6% on account of the deceleration of the increase in business sector inventories and of the deceleration of the growth of gross fixed capital formation. Gross fixed capital formation grew by 17%, primarily due to business sector investments in machinery and equipment and to the government sector investments in buildings and structures. Household final consumption expenditures increased by 3%. The increase in the purchase of vehicles and consumption of telephone services had the biggest contribution to the growth. The domestic demand was continually smaller than the GDP by output approach.

Source: Statistics Estonia

Saving growth increased, current account deficit decreased

Somewhat surprisingly, the acceleration of the growth in domestic demand did not increase the current account deficit. Similarly to the beginning of last year, the current account showed a small deficit this year. The current account deficit amounted to 2.2% of the GDP in the first quarter, standing lower than a year ago.

Goods export slowed down and import gained momentum, with a bulk of the deterioration in the balance of goods balanced out by a greater surplus of the services account. Unlike the export of goods, the speed of growth in services exceeded that of the second half of last year. The decrease in the surplus of goods and services was thus minimal. This means that, in the first quarter of the year, domestic demand grew more or less on par with savings.

The decrease in the current account deficit was conditioned by a decline in the profitability of foreign investments made in Estonia, as the direct investment income dropped by one-fifth during the year.

Debt cash flows dominated in both capital outflow and capital inflow. The external debt of Estonia grew by 2% in the quarter, amounting to 97% of the GDP. The debt investments of Estonian residents were greater still, with the net debt thus continuing to reduce. By the end of the quarter, the net debt amounted to 5% of the GDP.

Estonia’s Balance of Payments and International Investment Position are available on the website of Eesti Pank.

Author: Andres Saarniit, economist of Eesti Pank

Source: Bank of Estonia