Construction volumes decreased in Q1

According to Statistics Estonia, in the 1st quarter of 2014 compared to the same quarter of the previous year, the total production of Estonian construction enterprises in Estonia and foreign countries decreased 3%. In Estonia construction activities decreased 2%, and the construction volumes of Estonian enterprises in foreign countries decreased by nearly a fifth.

In the 1st quarter of 2014, the production value of construction enterprises amounted to 376 million euros, of which the production value of building construction was 254 million euros and the production of civil engineering totalled 122 million euros. Compared to the 1st quarter of 2013, the volume of building construction in real terms increased 4% and the volume of civil engineering decreased 15%.

The upturn in new building construction on the domestic construction market, which started last year, continued the growth trend at the beginning of this year. The repair and reconstruction work in building construction stayed on the level of the previous year. The construction of civil engineering objects, which supported the construction market positively for nearly three years, has decreased for two quarters in a row and caused a downturn in the whole construction market.

The construction volume of Estonian construction enterprises in foreign countries continued to decrease – there was a decrease in the construction of buildings as well as in civil engineering. Construction volumes in foreign countries accounted for 10% of the total volume of construction in the 1st quarter of 2014 (this share was 12% in the 1st quarter of 2013).

According to the data of the Register of Construction Works, in the 1st quarter of 2014, the number of dwelling completions was 748, i.e. 323 dwellings more than in the same period of 2013. About three quarters of completed dwellings were situated in blocks of flats. The majority of completed dwellings were situated in Tallinn.

There is still a demand for new dwellings with a good location and high quality. In the 1st quarter of 2014, building permits were granted for the construction of 667 dwellings, which is about a tenth more than in the 1st quarter a year ago. The most popular type of building was block of flats.

In the 1st quarter of 2014, the number of completed non-residential buildings was 187 with a useful floor area of 157,700 square metres – this was primarily made up of new storage, office and agricultural premises.

Construction volume index, 1st quarter 2003 – 1st quarter 2014
(average of quarters of 2010 = 100)

Diagram: Construction volume index, 1st quarter 2003 – 1st quarter 2014


Source: Statistics Estonia

Government plans to nominate ex-PM as candidate for European commissioner

At May 29, 2014 Cabinet meeting, members approved Prime Minister Taavi Rõivas’s plan to nominate Estonia’s most popular politician as a candidate for European commissioner.

Andrus Ansip, just elected to the European Parliment with the largest number of votes received during Sunday’s election, told ETV that he was geared toward dealing with finances, energy and regional affairs – the fields where Estonia gets most of its EU funding – if he was selected for the executive post.

Read more from ERR

Ambassador attracts Spanish unemployed youth to Estonia

For two years already, the Ambassador of Spain in Estonia, Alvaro de la Riva Guzman de Frutos, has been negotiating with enterprises, Estonian Ministry of Social Affairs and the job mediation network EURES aimed at attracting unemployed young Spaniards to come to Estonia for work.

Postimees writes that while at first the ambassador was negotiating with representatives of tourism and IT sectors, both of which require English language skills, the focus is now only on the IT sector, mainly because wages in Estonian hotel and restaurant business are too low to compete, for instance, with Norway.

Read more from BBN

Interview with governor of central bank

Interview with Ardo Hansson, Governor of Eesti Pank and Member of the Governing Council of the ECB, and news agency MNI, was conducted on 21 May 2014.

European Central Bank Governing Council member Ardo Hansson has signalled a preference for negative interest rates on the Bank’s deposit facility should the Eurotower decide to ease borrowing costs further to address inflation concerns in the currency area.

Speaking exclusively with MNI as the Governing Council gathered for its mid-month meeting in Frankfurt this week, Hansson, however, would not pre-commit to easing measures in June and raised questions over the effectiveness of non-standard measures aimed at kick-starting credit to the real economy.

“Personally, I see a lot of attraction in keeping a certain width of the corridor. Certainly if you do keep that corridor it is a more powerful instrument than if you were to narrow it,” Hansson, who heads the Estonian central bank said while underlining the importance of nurturing the recent normalization of money markets. “If the corridor becomes too narrow, then you drive banks towards the Eurosystem again.”

“Negative interest rates are not completely uncharted territory as some of the smaller countries have done this. The fact that it has been tried elsewhere makes you a bit more comfortable but for us it is still going into new territory,” Hansson added. “It has been said enough times that there is technical readiness to do this.”

However, Hansson would not pre-commit to any action in June and cautioned against taking a one-sided view of the euro’s strength on the inflation profile.

“You cannot look at one side of the equation alone and say the euro is strengthening therefore it is uniformly negative for our medium-term price stability. It is an exogenous shock with money flowing in from abroad which is at the same time easing monetary conditions by lowering the market interest rates,” Hansson said. “The combined effect is important to keep in mind.”

While ECB staff forecasts in June are “a very important input” Hansson also said that there would not be a “mechanical” reaction to potential downward revisions of the inflation outlook. “Everyone can have a view to whether their own assumptions are more or less optimistic than what the staff has.”

ECB President Mario Draghi during his regular May press conference said that the “Governing Council is comfortable with acting next time but before, we want to see the staff projections that we come out with in early June.”

Bundesbank President Jens Weidmann in an interview with German press earlier this week underlined that “it is not yet clear that we will have to act all.”

“If it looks like this period of low inflation kind of becomes more protracted then obviously the level of concern becomes higher,” Hansson said. “Certainly, to the extent that it is weaker towards the medium term it strengthens the case for doing something.”

Hansson also took a sceptical view on central bank measures to kick-start lending to the real economy via targeted liquidity operations

“It is not that there is necessarily this huge latent demand out there that somehow needs to be unlocked. If we talk about an output gap – a persistent one that will last for several years – the corollary has to be that there is spare capacity which then means that many companies would say that there is no need to invest if I have spare capacity. This is totally understandable,” he said.

“In some sense this sluggish growth of credit or the slight decline in credit to the extent that it is a rational response of either banks or enterprises to their current situation both balance sheet and level of demand then any attempted measures would be more like pushing water uphill. In this setting, you have to at least ask how effective it is going to be,” he added.

Designing such an operation that would ensure banks do pass on funds to the real economy would be a big challenge as well, Hansson said: “You want to make sure that you can somehow define a measure that cannot be gamed or evaded so much.”

At the same time, it must not encourage banks to delay the writing off or provisioning of bad loans, he argued.

“You could imagine if somebody said the price you get is somehow dependent on your net expansion of credit and then every time you write off your net credit provision becomes smaller then banks might say I would love to write it off but it is a financial penalty for me.”

“I think the challenge of getting this credit channel more active is actually rather high. So I think here there are real questions of possible effectiveness and operational design issues,” Hansson stressed.

At the current juncture, Hansson sees no need for unconditional liquidity operations but said that the ECB continues to monitor developments on money markets and is ready to inject additional liquidity if needed.

Hansson cautioned that the recent market developments may have further complicated possible asset purchases by the Eurotower. “I think in several jurisdictions you have these tensions between still sluggish recovery and very booming asset markets. I think this concern is something that you have to factor in,” he said. In particular, Hansson said that the “this turnaround in the bond markets in stressed countries has been rather high.”

“The more you see this bullishness in asset markets, the bigger the risks that this would lead to misallocation of credit so that the quality of credit starts declining.” While macro-prudential tools “in principle” may be a way to address such risks, Hansson cautioned that these “are rather new and untested.”

Nevertheless, Hansson said that technical work on possible asset purchases – both of private and public sector assets – is ongoing. Questioned about recent suggestions by the Bruegel institute that the ECB should consider buying up bonds from the European Financial Stability Facility and European Stability Mechanism bailout funds as well as from the European Investment Bank, Hansson said he thinks “this is narrowing in on specifics somewhat quickly.”

“The staff could first look at mapping out the entire universe of tradable securities and having a view of what is out there and then honing in on what might qualify or not. In terms of narrowing in, I would look more at the broader split between public and private,” Hansson said.

Hansson also expressed support for Draghi’s considerations to reduce the frequency of ECB monetary policy meetings. “We do not usually change things month-by-month. I do not see a lot of disadvantages in having fewer meetings. Also in terms of possible publications of the summaries it makes a lot more sense to have a longer cycle. I don’t see how you can produce meaningful high quality summaries in a space of a month that would not somehow interfere with the message,” Hansson said.

In terms of the broader economy, Hansson conceded that first quarter GDP in the Eurozone, which slowed to 0.2% from 0.4% in the final three months of last year, may have come as a disappointment to markets, but argued that it’s not clear to what extent the sluggish pace would impact longer term prospects for growth and price developments.

“We always said that the recovery is there but that it is going to be slow it is going to be fragile so you expect that quarter on quarter, some quarters may be a bit better and some may be a bit worse. In this sense, it confirms the view of a slow and fragile recovery,” he said. “All the soft data that we have had for this quarter too is more on the encouraging side so that probably we will have a fifth quarter of positive growth as well.”

Source: Bank of Estonia

2013 was a fruitful year for Estonian film

According to Statistics Estonia, 40 full-length films were released in 2013. They included 10 of full-length feature films, 27 full-length documentaries, two full length animations and one other film.

In total, there were 235 films released in 2013 in Estonia, of which 40 were full-length films and 195 were short films, most of these have been broadcast on TV. In cinemas, 18 full-length films were screened, which included 9 full-length feature films, 7 full-length documentaries, 1 full-length animated cartoon and one other full-length film, which cannot be classified as any of the previous ones. Although slightly fewer films were released in 2013 than in 2012, when Estonian film celebrated its 100th anniversary, it has still been a productive year for Estonian film.

A total of 376 films were screened in Estonian cinemas, 50 of these were Estonian films. The attendance of Estonian cinemas was nearly 2.6 million visits, and it increased slightly compared to the year 2012.

Most popular Estonian films in 2013 were “Kertu” directed by Ilmar Raag (42,500 visits), the Estonian and Georgian co-production “Tangerines” („Mandariinid“) directed by Zaza Urushadze (nearly 33,000 vistis) and “Living Images” („Elavad pildid“) directed by Hardi Volmer (more than 25,000 visits). Among all films, the most popular ones were “Despicable Me 2” (nearly 97,000 vistis), “The Croods” (nearly 62,000 visits), and “Fast & Furious 6” (58,000 visits). All three were the production of the United States of America.

The average price of a cinema ticket was 4.6 euros and it increased slightly compared to the previous year.

Full-length film – a film of a duration of at least 60 minutes (52 minutes in the case of TV formats).

Estonian film production, 2009–2013

Diagram: Estonian film production, 2009–2013

Source: Statistics Estonia

Minister seeks to stop sale of Tallinn TV Tower

Estonian Minister of Economic Affairs Urve Palo says that the planned sale of Levira, network services provider and transmitter of TV and radio channels, should be reversed.

Eesti Päevaleht writes that Palo is referring to security considerations and emotional aspects because Levira also owns the Tallinn TV Tower, a symbol of Estonia regaining independence that the Soviet Army attempted to conquer in August 1991 as part of the coup d’etat.

Read more from BBN


Tallink reports EUR 23m loss in Q1

Ferry operator Tallink had an operating loss of 23 million euros in the first quarter.

The first quarter is normally a low season for the company, but the loss was one-third larger than the loss in the first quarter of last year.

Several ships underwent scheduled maintenance in the first quarter, but the results were also affected by the maintenance and upgrading of the cruise ship Silja Serenade.

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Biggest private investor pulls out of Estonian share

Stefan Andersson, a Swedish private investor who has been one of the biggest investors in Tallinn Stock Exchange, has sold most of its holdings, writes Äripäev.

Last year, Andersson sold 842,706 euros worth of shares of Merko Ehitus, 235,000 euros worth of Tallinna Vesi, 115,000 euros worth of Tallink and 95,000 euros worth of Järvevana.

In addition, he sold 413,000 euros in Fortum shares and 163,000 euros of UPM shares.

All in all, Andersson sold about 1.9 million euros worth of shares in 2013.

Read more from BBN

Two real estate developers imprisoned

In 2006, one of Estonia’s largest banks SEB lent almost 3 million euros to two Estonian real estate developers who promised to build an office building and parking lot in central Tallinn, but actually invested it in real estate in Spanish Costa del Sol, writes Äripäev.

The real estate businessmen in question were 42-year-old Kaido Kaljusaar and 41-year-old Andres Lauri. To be more believable for banks, they set up a company called Arco Kapital which sounded similar to the listed real estate developer Arco Vara.

Read more from BBN

President proclaims VAT law amendments

Estonian President Toomas Hendrik Ilves promulgated the amendments to the Value-Added Tax Act on May 20, 2014.

The law makes it mandatory for businesses to disclose in an annex to the VAT declaration the other party in all transactions exceeding 1,000 euros.

Read more from BBN