Private clients make 85 pct of all domestic payments

A daily average of one million cashless payments were made in Estonia in the second quarter of 2015, with a total turnover of 393 million euros. The number of cashless payments was 5% higher compared to the same period a year ago, but the turnover was 8% less. The number of cashless payments has kept increasing over the past ten years, but turnover has been a lot more volatile, since it depends on both the general economic activity and, to a certain extent, the activity of larger individual companies. Private clients make 85% of all domestic payments, but it only makes up 9% of the total turnover of payments. Around one fifth of the cashless payments made in Estonia are settled using the interbank retail payments system STEP2.

A daily average of 116,000 domestic payments were made in the second quarter of 2015 between banks using STEP2, with a total turnover of 144 million euros. The number of payments was up 7% from the same time a year ago, while turnover increased 1% year-on-year. Although the majority of the payments are made within one bank, interbank payments have steadily made up 20-24% of all domestic payments over the past ten years. An average of 12,000 payments a day were made from Estonian banks to other countries using STEP2. Payments were made to 34 countries, with most of them going to Finland and Germany (a total of 31% of all cross-border payments).

TARGET2 express transfers, which transfer money from one bank to another in up to 15 minutes, are also used to send payments to another bank.1 This option is still not very widely used in Estonia: only 100 domestic express transfers per day were made by bank clients in the second quarter.

Private clients tend to use bank cards for purchases more and more. In the second quarter of 2015, private clients made 667,000 card payments every day, which is more than triple the number of card payments made in 2005. The share of card payments among all domestic payments made by private clients was 75% in the second quarter, while ten years ago it was 10% smaller. Private clients are withdrawing cash less and less frequently. Ten years ago, private clients withdrew cash from ATMs an average of 137,000 times a day, but in the second quarter of 2015, that number had dropped to 103,000 (117,000 times a day in the second quarter of 2011 and 108,000 times a day in the same period in 2013).

Among other cashless methods of payment, private clients use internet bank payment orders the most. An average of 109,000 internet bank payment orders per day were made in the second quarter, which is 1.7 times more than ten years ago. The share of internet bank payment orders among domestic payments has decreased, though: from 19% ten years ago to 12% now. In 2005, the third most important cashless method of payment was direct debit (10%). Now, however, e-invoice standing orders make up 6% of all cashless methods of payment. Payments made through a bank link reached 4% in the second quarter, while the share of other cashless methods of payment was 1% or less.

Read more from Bank of Estonia website

Author: Tiina Soosalu, Eesti Pank Payment and Settlement Systems Department

Record amount of wind energy produced in first half year

Extraordinary stability of windy weather in the first half of this year enabled the state-owned energy company Eesti Energia to produce a record amount of 124,466 megawatt-hours of wind energy during the six months, which is enough to meet the yearly consumption needs of more than 40,000 households of average size.

“We are pleased to be able to say that Estonia has reached a stage where it is able to effectively use the wind resource and produce electric energy from it in different places all over the country in an environment friendly manner,” Innar Kaasik, manager for renewable energy and small-scale CHP production at Eesti Energia, said.

Kaasik said the stability of winds this year has allowed to take the maximum out of wind power.

“Had winds taken the shape of storms, Eesti Energia would not have been able to ensure so big an output at its wind farms. It is under these kind of conditions of stable winds that we can fine-tune our equipment to yield the maximum,” Kaasik said.

Kaasik also said good wind conditions and the country’s long coastline alone would not be enough to ensure solid output if the owners of wind farms in Estonia weren’t giving proper service to their equipment.

“Where 2014 was a year poorer in wind than years here on the average, 2015 has made up for it in all respects,” he said. “Wind farms of Eesti Energia produced 124,466 megavatt-hours of electric energy during the first six months, which is more by a quarter than in the first half of 2014. By way of example, an amount of electric energy like this is consumed by 41,488 households of average consumption in a year.”

Increased production of wind energy makes it possible to save Estonian oil shale for high value-added activities, such as production of shale oil. The amount of wind energy generated during the first six months of the year is equal to the amount that can be produced by burning 146,430 tons of oil shale and releasing 117,144 tons of carbon dioxide into the air. More than 100,000 barrels of shale oil can be produced from 146,430 tons of oil shale.

Eesti Energia is the second largest wind energy producer in Estonia. The state-owned company has four wind farms, located respectively in Narva, Aulepa, Virtsu and Paldiski.

Source: BNS via Estonian Review

Czech science centre buys Estonian exhibition

The Ahhaa science centre based in Estonia’s second-largest city Tartu has sold its exhibition “Sail or Sink?” for 300,000 euros to a science centre in the Czech Republic from where it will be rented forward to Poland, the daily Eesti Päevaleht reports.

This is the first time for an Estonian exhibition to be sold, the paper notes.

Ahhaa started lobbying for selling or renting the exhibition last November when directors of 50 European science centres gathered in Tartu for a conference, Eesti Päevaleht says. Board member of Ahhaa Andres Juur told the paper that then a spontaneous auction was mounted which was won by a large British science centre. However, the British eventually changed their mind. After that the Czech Techmania showed interest and the agreement was signed at the end of June.

Juur declined to disclose the exact value of the agreement but said it was around 300,000 euros. However, this does not mean a big profit. “We earned back about as much as we put in with the sale,” he said but added that selling rather than renting was the right decision.

It is planned to open the exhibition in the Czech Republic already on Aug. 20.

“Sail or Sink?” that cost over 200,000 euros to mount was on display at both Ahhaa and the Seaplane Harbour in Tallinn for half a year, attracting around 275,000 visitors. It features 14 hands-on exhibits installed in large containers, where visitors can see, read and experiment with how the forces of nature act at sea and how they have influenced maritime history.

Source: Baltic News Service via Estonian Review

Estonians paying less in cash

More Estonians than ever are using debit cards to make payments, instead of cash.

Almost 700,000 card payments are conducted in Estonia every day, over three times more than 10 years ago, the country’s central bank said on Friday.

This forms 75 percent of all internal payments in the country, compared to 65 percent in 2005.

The number of cash withdrawals has also declined by roughly 35 percent.

Estonia’s success as an e-state started largely due to introduction of online banking in the 1990s. Today, practically all banking transactions are done electronically.

Source: ERR via Estonian Review

African swine fever found in Estonia

African swine fever (ASF) has spread to a third agricultural holding in Estonia’s southern Viljandi County which is only a few kilometres away from the Baltic states’ largest industrial pig farm Ekseko, the regional newspaper Sakala reports.

The Veterinary and Food Board received Monday afternoon blood test results which confirmed the presence of the disease on a small holding just a few kilometres from the Ekseko farm of the meatpacker Rakvere Lihakombinaat. Results of tests on additional samples taken from the carcass are expected on Tuesday, head of the Viljandi veterinary centre Terje Oper said.

Kerstin Aps, communications chief at Rakvere Farmid that owns Ekseko, said the company is not affected by the discovery as they have already introduced all possible precautionary measures. Asked what being included in a quarantine zone would mean for the company, Aps said she can offer no comment for the time being.

Last week ASF was found on two pig farms in Viljandi County. More than 500 pigs were destroyed. The disease has also been diagnosed on a family farm in Valga County.

ASF does not pose a threat to other animal species or humans but can be deadly for domestic and wild swine and cause massive losses to the pig farming sector.

Source: Baltic News Service via Estonian Review

Estonia’s exporters still struggling

• Sluggish export volumes to be expected in 2015
• Situation across sectors differs
• Growth of exports expected to strengthen in 2016

Sluggish export volumes to be expected in 2015
The growth of exports has been rather modest in recent years. One of the reasons has been weak demand in Estonia’s export markets. Import demand in Latvia and Finland has been stagnant for the past two-three years, and demand in Russia has deteriorated remarkably in 2014-2015.

Situation across sectors differs
The producers of electronics, wood/furniture, and metal products are doing relatively well, while exporters related to the Russian market (dairy, vodka, the oil industry, logistics and tourism) feel the impact of smaller orders from the east. Also, in terms of output prices, some enterprises have been able to ask higher prices for their products (pharmaceuticals, metals, and furniture), while others have had to accommodate not only weak demand but also lower prices (most notably, petroleum products, but also electronics, food, and chemicals).

Growth of exports expected to strengthen in 2016
Sentiment among Estonian manufacturers has deteriorated somewhat this year as export order books are thinner. We expect export demand, as well as export prices, to remain tepid throughout 2015. Demand will weaken in Russia, Latvia, and Lithuania and remain stagnant in Finland this year. Export volumes should pick up in 2016, supported by more robust economic growth among Estonia’s trade partners. This should widen export opportunities for Estonian companies and boost export volumes.

Source: Swedbank

Bill created to tighten smoking laws

The government has drawn up a bill which will further limit where smoking is allowed.

In 2007, smoking was banned indoors in bars and cafes, with the new bill taking aim at designated smoking areas in buildings. Lawmakers are aiming for the ban to come into effect in 2017, Eesti Päevaleht reported. Prisons will also become smoke free that year.

Special rooms for smoking may still be set up in buildings, but according to the daily, these rooms will be the next to go.

“Ventilation systems, designated smoking rooms and partial limits do not offer people enough protection from second hand smoke in the environment,” the bill said.

The Health Board has so far identified 40 such areas, including in care homes and casinos.

Diana Ingerainen, head of a union of GPs, said limiting places where people can smoke has shown to be effective in cutting smoker numbers.

The number of people, between the age of 16-64, who smoke at least one cigarette every day has plummeted from slightly over 50 percent to 19.5 percent in 2014.

Source: ERR via Estonian Review

Minister promises to regulate foreign doctors

Health and Labour Minister Rannar Vassiljev said he will come out with proposals on how to regulate the growing number of medical doctors from outside the EU, who are working in Estonia.

The Ida-Viru central hospital employs 160 doctors, of whom a fifth are from other former Soviet Union states, and most have arrived in recent years, Postimees reported.

Tarmo Bakler, the CEO of the hospital, said they have received more doctors from outside the EU than from the University of Tartu, which has Estonia’s biggest medical school.

Bakler said foreign doctors in Estonia are partially unregulated, which gives way to different interpretations of existent laws.

Currently, foreign doctors have to have completed a three-year residency period. Doctors in Russia must only complete a one year program in Russia, before receiving their medical licenses. That has hindered some from coming to work in Estonia, but the requirement can be substituted for an exam at the University of Tartu, or for work experience.

Source: ERR via Estonian Review

EU needs common travel warning system

The European Union needs a unified travel warning system as the warnings issued by individual member states are uneven and leave to be desired, member of the European Parliament for Estonia Urmas Paet says.

Paet turned to the European Commission drawing attention to the uneven character of travel warnings and risk assessments of EU countries and proposing a single EU-wide system.

Recent attacks against European tourists in Tunisia revealed the uneven character and shortcomings of the current travel warning systems, the Estonian MEP said. “All EU member states issue public travel warnings and risk assessments for travellers, but different countries have different systems and the overall picture is uneven,” he said.

Paet also said some tour operators do not take warnings seriously and continue to arrange package tours to countries and areas deemed unsafe. He therefore asked the Commission about the possibility of introducing a common travel warning system and whether observing travel warnings could be made mandatory for operators of package tours.

Source: Baltic News Service via Estonian Review

The volume of deposits has increased by 11 pct over the year

The volume of loans and leases issued to companies and households was 15.5 billion euros at the end of June. Year-on-year, the loan and lease portfolio has grown by 2.9%. Annual growth in the volume of loans and leases to companies decelerated to 2% in June. The areas that saw the fastest growth in corporate borrowing over the past year were trade and real estate development.

The growth of the household loan and lease portfolio accelerated somewhat. Over the year, the volume of housing loans has increased by 3.8% and the volume of other loans by 4.3%. Housing loans worth 81 million euros were issued in June, i.e. about the same amount as in the previous months. Car leases issued to individuals have increased quickly, while car leases to companies have decreased by the same amount. In June, 3% more car leases in total were issued than the same time a year before.

The interest level of loans and leases continues to be low thanks to low base interest rates. The interest rate on both housing loans issued to households and long-term loans issued to companies was 2.2% in June.

The quality of loans issued by banks declined a little, similarly to the previous months. The share of loans overdue for more than 60 days grew to 1.7% of the loan portfolio. The share of loans overdue has increased the most among companies related to agriculture and real estate development.

Companies and households are still actively depositing their funds. Over the past year, the amount of corporate and household deposits in banks’ balance sheets has increased by 10.7%. Corporate deposits have seen a particularly fast rise, as their annual growth increased by 14.2%. Like in the previous months, household deposits have gone up by almost 8% per year.

Banks earned 261 million euros in profit in the second quarter. The greatest factors impacting the change in profits were the dividend income from subsidiaries (229 million euros) and the income tax withheld from the large dividend payment made from the profit of the previous years (45 million euros). Without one-off transactions, the banks earned 77 million euros in profit in the second quarter, which is 6% less than in the second quarter of last year. Profits were supported by an increase in commission income, but decreased because of smaller net interest income and larger administrative expenses.

Source: Bank of Estonia

Author: Jaak Tõrs, Head of the Financial Stability Department