Russians buy Estonian ticket seller

LHV Capital that is majority owner of Baltic Ticket Holdings which operates ticket sales service under the name of Piletilevi, sold the online ticket seller to Russian company Kassir.ru, reported Äripäev.

Baltic Ticket Holdings operates in the Baltic countries through its subsidiaries Piletilevi in Estonia, Bilesu Serviss in Latvia and Bilietu Pasaulis in Lithuania. The company also has an affiliate in Belarus named Biletik .

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Estonia’s richest businessman: tax system works

Transport businessman Oleg Ossinovski who was ranked no. 1 in the Äripäev richlist with assets of EUR 297m says that he is a strong advocate of the Estonian tax system, writes Äripäev.

He says that zero-income tax on reinvested profits is more sensible than regular income tax.

„Our tax system enables companies to develop rapidly by re-investing their profits, thus become stronger, more competitive, and, as a result, richer. In ten years, the state now starts to collecting tax since more companies are paying out dividends,” said the businessmen.

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Estonian oilshale may lose its value

Eesti Energia CEO Sandor Liive says that if the EU continues to toughen its climate policy, the value of the Estonian oilshale may plummet in 30 to 40 years.

„To the best of our knowledge today, the faster the state, the owner of our oilshale, uses oilshale the more value it will get out of it,” Liive said, speaking  at a press conference hosted by Eesti Energia.

„While at today’s rates, the Estonian oilshale may be worth EUR 18 billion, it could fall to zero in thirty to fourty years,” he added.

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Most of the production has been harvested

According to Statistics Estonia, by 15 September, 97% of the sown area of cereals, 79% of the sown area of rape and turnip rape, and 47% of the area under potatoes had been harvested in Estonia.

Compared to the previous year, harvesting has been considerably earlier this year. The yield per hectare of winter cereals is smaller, but the yield of spring cereals is better compared to the previous year. The yield of rape and turnip rape, peas and potatoes is bigger than last year.

According to preliminary data, in Estonia, in 2013 cereals were grown on 308,700 hectares, of which 97% has been harvested for grain. One hectare of the harvested area gave on average 3,317 kilograms of cereals, with the average yield per hectare being 1,981 kilograms for rye, 3,458 kilograms for wheat, 3,475 kilograms for barley and 2,664 kilograms for oats. A part of cereals sown for grain will be harvested for green fodder.

Rape and turnip rape were grown on 84,800 hectares. Most of winter rape and winter turnip rape has been harvested and more than three quarters of spring rape and spring turnip rape has also been harvested already. One hectare of the harvested area gave on average 2,000 kilograms of rape and turnip rape seeds.

Potatoes were grown on 6,400 hectares, of which 47% has been harvested. One hectare of the harvested area gave on average 21,982 kilograms of potatoes.

Source: Statistics Estonia

Refunding VAT on company cars may change

Estonian Ministry of Finance is considering a plan to limit the VAT refund that the state pays companies that purchase a company car, writes Eesti Päevaleht.

The Ministry has drafted a bill under which the state would refund only half of VAT that the company pays when purchasing a new car and a maximum of EUR 2,000.

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Swedbank: reasons for the wage rally

Rapid growth of wages has so far not hampered enterprises’ finances or pushed up inflation.
• Scarcity of labour is driving up wages.
• The fast growth of wages is expected to continue, so enterprises need to adjust.

The fast growth of wages has so far not affected enterprises’ finances
The growth of average gross wages (already above 8% in the second quarter of 2013, compared with last year) has supported the main engine of economic growth in Estonia currently – private consumption. The longer-term negative effects of labour costs’ growing faster than productivity are still to be seen. The share of enterprises’ personnel expenses in total costs or sales has not increased so far, and the overall profitability of Estonian enterprises remains good. Also, core inflation remains low and inflation expectations limited.

Wage growth is driven by the lack of suitable labour
Labour demand is growing faster than labour supply, pushing up wages. In addition, Estonian employers face competition from abroad, especially Finland, where the wage level is several times higher. In the future, the challenge of the lack of suitable labour will only sharpen. The supply of labour will decrease as the decline in the working-age population will be bigger than the increase in the participation rate. The unemployment rate is also forecast to get close to the level where additions to the suitable workforce will be hard to find amongst the unemployed and inactive.

The growth of wages is expected to remain rapid
Because the push factors are only getting stronger, we do not foresee the growth of wages to slow remarkably in the coming quarters, unless there would be an external negative shock. So, growing labour costs are eventually expected to start affecting enterprises’ profitability. It remains to be seen if enterprises will be able to increase productivity levels to match the higher labour costs.

Source: Swedbank report about the Estonian economy

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General government deficit adjusted

According to the adjusted data of Statistics Estonia, in 2012 the Estonian general government deficit was 0.2% and the gross debt level was 9.9% of the gross domestic product (GDP).

At the end of 2012, the total expenditures of the general government exceeded the revenues by 41.2 million euros, according to the Maastricht deficit criteria. The deficit of central government was 129.9 million euros, and in the local governments’ sector expenditures amounted to 32.2 million euros more than revenues earned in 2012. During the revision, the general government sector’s consolidated deficit decreased by 12.8 million euros; the revenues and expenditures of the central government as well as the local governments were corrected based on the audited state bookkeeping data. The surplus of social security funds was 120.9 million euros, but this was not enough to secure the balance of the consolidated budget.The general government consolidated debt (Maastricht debt) rose to 1.7 billion euros by the end of 2012. Two thirds of it resulted from the central government’s debt level which increased twice. The central government debt was 1.1 billion euros. The overall debt level of local governments grew to 0.6 billion euros. As at the end of 2012, social security funds did not contribute to the general government debt at all.Surplus/deficit by sub-sectors of general government in Estonia, 2003–2012

Diagram: Surplus/deficit by sub-sectors of general government in Estonia, 2003–2012

Surplus/deficit by sub-sectors of general government in Estonia, 2003–2012

Source: Statistics Estonia

Estonian banking in August

Large refinancing transactions raised the monthly volume of new loans  to businesses in August to its highest level in recent years. During the month banks granted 350 million euros of long-term loans and leases to companies in Estonia, which was almost double the amount of a year ago and meant that new lending reached close to the levels seen in the spring of 2008. Some very large individual transactions were behind this major growth, mainly to finance infrastructure, but also for real estate, industrial production and trading. Without these unusually large transactions, loan volumes were generally what they have been in recent months. As growth in the economy has slowed, there has been a decline in the growth in short-term financing for companies since the end of 2012.

As companies used the majority of their borrowings for refinancing earlier loans, the high volume of new loans did not increase the total portfolio in August. The total volume of loans and leases to companies grew during the month by 54 million euros and the annual growth rate accelerated from 2.4% to 2.8%.

Activity in the housing loan market remained relatively high in August. Households took out 61 million euros of new housing loans, which was a little less than they did in July. The annual growth in new loans has varied widely from month to month, but for the last three months together it was around 15%. The total housing loan portfolio remained at the same value in August as a year earlier at 5.8 billion euros.

The annual growth in the total stock of loans and leases to companies and households accelerated in August from 1% to 1.3%. The annual growth in the loan and lease portfolio has been in positive territory for a whole year now. However, loan growth has been somewhat slower than Eesti Pank forecast as companies have borrowed less than expected. The low growth can partly be explained by structural and technical factors, such as the exit of the branch of one foreign bank from the Estonian market or the reclassification of loans. Borrowing activity has also weakened somewhat as the macroeconomic outlook has become more modest. The total volume of loans and leases increased in August by 59 million euros to 14.8 billion euros.

Interest rates on loans have remained unchanged this year. The average interest rate for housing loans granted in August was 2.6% and that for long-term corporate loans was 3%.

The share of loans overdue by more than 60 days in the loan portfolio fell during the month from 2.8% to 2.7%. The main cause of the decline in overdue loans and loan provisions continues to be write-offs. The ability of households and companies to service their loans has remained strong enough and has not caused any significant new problems in loan quality for banks.

The annual growth in deposits remained at 3%. The total deposits of households and companies have been fairly stable since the spring of this year and remained at 8.7 billion euros at the end of August. The annual growth in corporate deposits in August was negative at -0.4%, as it was in the previous month, due to the high comparison base and reclassifications. Annual growth in household deposits stabilised at the same time at close to 6%.

Financial sector statistics and their publication schedule can be found on the website of Eesti Pank at http://statistika.eestipank.ee/?lng=en#treeMenu/FINANTSSEKTOR  

Source: Bank of Estonia

Author: Jana Kask, Acting Head of the Financial Stability Division of Eesti Pank

Government sets next year’s budget revenue at EUR 8 billion

The government reached an agreement on the 2014 state budget during a Cabinet meeting yesterday, reported ERR.

The draft foresees costs growing by 400 million euros – 5% – compared with this year’s budget, reaching 8.1 billion euros, while revenues will amount to 8 billion euros. The resulting budget deficit will be around 0.4% of GDP.

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Report in Estonian from the Ministry of Finance website

Finnish construction company expands into Estonia

Finnish building group Graniittirakennus Kallio OY has announced plans to expand in Estonia and later to Latvia and Lithuania, writes Äripäev.

The company’s president and CEO Keijo Haavikko has close links to Estonia, having an Estonian wife.

“I can see growth opportunities in the next five years in Estonia by specializing in EU-funded infrastructure construction projects,” he said.

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