Construction volumes increased in the 3rd quarter

According to Statistics Estonia, in the 3rd quarter of 2013 compared to the same quarter of the previous year, the total production of Estonian construction enterprises in Estonia and foreign countries grew 4%.

In the 3rd quarter of 2013, the production value of construction enterprises amounted to 697 million euros, of which the production value of building construction was 380 million euros and the production of civil engineering totalled 317 million euros. Compared to the 3rd quarter of 2012, the volume of building construction and civil engineering in real terms increased by 4% and 5%, respectively.

The growth on the domestic construction market was mainly caused by the upturn in new building construction and was also supported by civil engineering. The repair and reconstruction work in building construction stayed on the level of the previous year.

The construction in foreign countries, which showed a downward trend in the first half of this year, took a little upturn in the 3rd quarter. The construction volume of Estonian construction enterprises in foreign countries increased by 2% in comparison with the same period of the previous year. The increase was mainly caused by building construction. The share of the construction volumes in foreign countries accounted for 8% of the total volume of construction in the 3rd quarter of 2013.

According to the data of the Register of Construction Works, in the 3rd quarter of 2013, the number of dwelling completions was 436, i.e. 50 dwellings more than in the same period of 2012. About a half of completed dwellings were situated in one-family, two-family or terraced houses. The majority of completed dwellings were situated in the neighbouring rural municipalities of Tallinn. There is still a demand for new dwellings with a good location and high quality. In the 3rd quarter of 2013, building permits were granted for the construction of 784 dwellings, which is about a fourth more than in the 3rd quarter a year ago. The most popular type of building was block of flats.

In the 3rd quarter of 2013, the number of completed non-residential buildings was 223 with a useful floor area of 176,500 square metres – this was primarily made up of new storage and agricultural premises. Compared to the 3rd quarter of 2012, the useful floor area as well as the cubic capacity of completed non-residential buildings increased.

Construction volume index and its trend, 1st quarter 2000 – 3rd quarter 2013 (average of quarters of 2010 = 100)

Diagram:Construction volume index and its trend, 1st quarter 2000 – 3rd quarter 2013 (average of quarters of 2010 = 100)

Source: Statistics Estonia

A bigger population does not guarantee a richer local government

On 29 November, Statistics Estonia is presenting the publication Regional Development in Estonia 2013, which focuses on business and economy this time. One of the topics discussed in the publication is the viability index of local government units.

The viability index confirms the gap between Tallinn and its vicinity, and the remote areas located further away from Tallinn. There is a positive relation between the population size and the viability index, but it is not a significant one – a bigger population alone will not guarantee a better result.

The first time that Statistics Estonia calculated and published the viability index of local government units was in 2004. The overviews of Estonia in 2004 and in 2013 are similar – more positive results are visible in Tallinn and its vicinity and on the Tallinn-Pärnu axis. More negative results were received in the region that is located on the Lake Peipus side of the Kunda-Ikla axis, where, as an exception, the area around Tartu forms a larger positive region. In Ida-Viru county, there is also a region that can be seen as rather positive. What can be highlighted as a more problematic area is the region which is formed by the northern part of Pärnu county and the southern part of Lääne county. A similar picture is characteristic of Estonia based on several indicators.

“If we ask, in terms of the viability index, whether local government units with a larger population are more viable, we can say that there is a positive relation between a bigger population size and a higher viability index, but this relation is not strong enough to claim that the bigger, the more viable,” noted Mihkel Servinski, Principal Analyst at Statistics Estonia.

Viability index on local government units, 2011

Kaart: Viability index on local government units, 2011

According to the viability index, the most viable rural municipality in Estonia is Viimsi. “This is relatively unsurprising and Viimsi can be proud of it. However, estimating the viability index is not about determining “the winner”,” Servinski said, and added that the task of regional statistics is to provide information that would enable local government units to analyse their strengths and weaknesses. “Perhaps the viability index performs this task with more zing than the eight indicators that are the components of the index would separately. According to Statistics Estonia, the index gives food for thought to both those at the top of the ranking and those at the bottom of it. There is no reason to pronounce the latter hopeless and also the former has fields that need developing,” Servinski explained.

The viability index is based on eight indicators: population change, the share of persons aged under 65 in total population, mean registered employment, receipts from personal income tax per capita, local government revenue per capita, the share of persons with higher education, the number of companies per 1,000 inhabitants, the number of economic activities of companies. The value of the index is not directly related to how the indicators ranked: the index value is in accordance with the value of the indicator.

Source: Statistics Estonia

Tallinn scores final victory in battle for building of House of Blackheads

The central government has been forced to swallow a bitter bill when the Supreme Court this week declined to hear an appeal over the ownership of the building of House of Blackheads, reports ERR.

This means that the city of Tallinn will remain owner of the historically valuable building established by a medieval Baltic German guild in Pikk street.

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Accor plans to expand to Estonia

Accor, the French hotel chain, is showing an interest in Estonia, with plans for a location in the heart of downtown Tallinn.

A member of the board of Palmgrupp OÜ, an Estonian real estate development company, says they have signed an agreement with Accor for managing two hotels, Postimees wrote.

The board member Janno Rokk, divulged no further information on the timetable, saying: “We are prepared to develop it when they come and they will come when the funding is in place.”

The development would take place on lots owned by OÜ Palmgrupp at Hobujaama 12 and 14a, the interchange where two sets of tram tracks meet and where a new shopping center recently opened.

Accor, which operates 3,555 hotels in 92 countries, would  bring its Adagio and Ibis trademarks to Estonia.

Source: ERR / Estonian Review

EBRD to invest EUR 20m in private equity in the Baltic states

The EBRD announced yesterday that it has agreed to provide an investment of up to EUR 20m to BaltCap Private Equity Fund II, L.P. for equity and equity-related investments in small and medium-sized enterprises and small mid-cap companies in Estonia, Latvia and Lithuania.

The fund has a target size of EUR 100 million and aims to develop Baltic companies into leaders in and beyond their region that can attract international investors.

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UK Prime Minister launches attack on EU migration

Äripäev writes that UK Prime Minister David Cameron has announced a crackdown on EU immigration, vowing to deport vagrants, restrict the right to benefits of foreign nationals and calling for new rules to stop “vast migrations”.

In an opinion letter published in the Financial Times, Cameron insisted that Europe has to reform to regain the trust of its people.

“Things have gone wrong under a system where 1m eastern Europeans settled in Britain after the round of EU enlargement in 2004,” the PM said

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Baltic Sea region report

Integrate. Compete. Grow
  • Growth in the region is set to improve after a weak 2013
  • Baltic Sea index: no gains in structural competitiveness
  • Reform push is needed to build competitiveness and growth

Growth in the region is set to improve after a weak 2013

The Baltic Sea region growth in 2013 will be just 1%. The situation is very diverse, ranging from a 0.6% contraction in Finland to a 4.3% expansion in Latvia. The cause of the slowdown is not only weak external demand, but also structural weakness pertinent to the region’s economies themselves. With the global outlook improving, we see the region expanding by 2.4% in 2014 and 2015 − still below potential. Swedish growth will speed up to 3%, supported by an improving labour market, fiscal expansion, and export recovery. Its key risk is the housing market and rising household debt. For Latvia and Lithuania, we forecast about 4% growth in 2014 and 2015 on the back of a strong labour market and better global growth. Similarly for Estonia with perhaps somewhat slower growth in 2014 as it struggles with a very weak growth this year. The key challenge for the three Baltic states is the labour market, i.e., to balance wage and productivity growth.

Baltic Sea index: no gains in structural competitiveness

The region is in the top 30% globally for its structural quality, but its ranking has not improved over the past five years. The region’s top strength is education; the weakest areas are foreign trade, tax policy, and financial markets. Finland has risen to the top, while Russia is still the lowest. Over the recent years, the most improvement has come from those with the lowest ranks – Poland and Russia – but others have been less ambitious. In Sweden, the speed of reforms has slowed, and it has slid down the rankings. The Baltic states have regained macro stability but have failed to improve their structural quality faster than others. This lack of progress − especially for the Baltic states, − where structural quality is significantly below that of the Nordics and Germany − will impair their growth going forward.

Reform push is needed to build competitiveness and growth

Improving competitiveness is a major source of growth when the global economy is weak. Key to improving competitiveness is to strengthen regional integration, and structural quality is essential to facilitate this. Most of the growth potential in the region thus can be unlocked by raising structural quality in the lowest ranking countries, i.e., Poland, the Baltic states, and above all, Russia, which often ranks way behind the others. Swedish structural quality is very strong but would gain from improvements in education, infrastructure, and entrepreneurship. In the Baltics, improvements are necessary across the board to lift them closer to the Nordics and Germany, but the most urgent ones are those to support productivity growth and help ease labour market overheating pressures. A major boost to innovation is necessary for Latvia and Lithuania, and also for Estonia, to make adequate use of their education quality.

Source: Swedbank

Prices of softwood logs have increased

Prices of softwood logs in Estonia rose during the past quarter, reaching the last few years’ record levels, data of the Private Forest Center foundation show.

The price of pine logs grew 1.3 percent, of small diameter pine logs and spruce logs 3.3 percent and of small diameter spruce logs 6.1 percent during the quarter. The average prices per cubic meter were 70.57 euros for pine logs, 65.63 euros for small pine logs, 73.01 euros for spruce logs and 67.55 euros for small spruce logs.

According to data of TNS Emor a ton of wood pellets cost an average of 207.96 euros in September, which means a rise of 3 percent compared to the previous quarter and 8.6 percent in annual comparison. The figure also represents a new high since 2008 when biofuel price statistics began to be collected for the Agriculture Ministry.

Average prices of hardwood remained at roughly previous levels in the ended quarter. Birch logs cost 2.4 percent more whereas alder logs were 2.6 percent cheaper. The trend was the same in comparison with the year-earlier prices.

Firewood prices have remained below the level of 24 euros for cubic meter since June and haven’t practically changed in recent months. Compared with the same time last year, firewood is nearly 8 percent cheaper.

The price of wood briquette rose in the third quarter by 3.1 percent compared to the previous quarter and by 3.5 percent year on year, averaging 161.77 euros per ton. Peat briquette cost an average of 128.8 euros a ton at the same time.

Source: BNS / Estonian Review

E.ON Ruhrgas pulling out of Baltic countries

Germany’s energy giant E.ON Ruhrgas has started its exit from Eastern European markets which includes selling its holdings in the three gas companies in Baltic countries where it roughty owns a third, along with Gazprom.

It is believed that the energy company is studying possibilities to sell its share in Estonian Gas to the Estonian state, but has not made a specific offer.

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Estonian logistics sector falling behind Baltic neighbours

A new survey by PricewaterhouseCoopers commissioned by the Estonian logistics cluster shows that Estonia’s cargo handling volumes have fallen 14% in the last ten years, while passenger transport is down 12% in eight years, writes Postimees.

Latvia and Lithuania, in the meantime, have been increasing volumes.

The survey shows that the logistisc sector accounts for 16% of the Estonian GDP, half of what it was ten years ago.

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