The producer price index of industrial output increased in January

According to Statistics Estonia, in January 2016, the producer price index of industrial output changed by 2.0% compared to December 2015 and by -0.1% compared to January 2015.

In January, compared to the previous month, the producer price index was more than average influenced by an increase in prices in electricity, gas, steam and air conditioning supply, and in the manufacture of electronic equipment and fuel oils but also by a decrease in prices in the repair and installation of machinery and equipment.

Compared to January 2015, the producer price index was more than average influenced by a decrease in prices in the manufacture of food products, wood and wood products and chemicals and chemical products but also by an increase in prices in the manufacture of electronic equipment, in electricity, gas, steam and air conditioning supply, mining and quarrying.

Change in producer price index of industrial output by economic activity, January 2016
Economic activity according to EMTAK 2008 January 2016 – December 2015, % January 2016 – January 2015, %
TOTAL 2.0 -0.1
Manufacturing 0.6 -0.9
Mining and quarrying -1.1 5.3
Electricity, gas, steam and air conditioning supply 20.6 4.7
Water supply; sewerage, waste management and remediation activities 3.4 3.4

In January 2016, the export price index changed by 0.7% compared to December 2015 and by 1.6% compared to January 2015.

In January, compared to the previous month, the prices of electricity, wood products and electronic equipment increased more than average, while the prices of oil products, leather and textile products decreased more than average.

In January 2016, the import price index changed by –1.4% compared to December 2015 and by 2.7% compared to January 2015.

In January, compared to the previous month, the prices of oil products, leather and chemical products decreased more than average, while the prices of electricity and paper and paper products increased more than average.

Source: Statistics Estonia
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Every fifth person in Estonia lives in relative poverty

According to Statistics Estonia, in 2014, 21.6% of the Estonian population lived in relative poverty and 6.3% in absolute poverty. The overall percentage of people living in relative poverty decreased 0.5 percentage points compared to the previous year, the percentage of people living in absolute poverty decreased 1.7 percentage points.

In 2014, the income of the population increased and income inequality slightly decreased. Social transfers (state benefits and pensions) helped to prevent falling into poverty, as had they not been included in income, the at-risk-of-poverty rate would have been 39.4% and the absolute poverty rate – 28.6%.

In 2014, a person was considered to be at-risk-of-poverty if his/her monthly equalised disposable income was below 394 euros (358 euros in 2013) and in absolute poverty if his/her monthly equalised disposable income was below 203 euros (205 euros in 2013). In 2014, the difference in income between the poorest and richest fifth of the population was 6.2-fold.

Compared to 2013, the at-risk-of-poverty rate has decreased in the case of people aged 18–64, but in the case of persons aged 65 and over, the at-risk-of-poverty rate has increased. In 2014, 36% of  persons aged 65 and over lived in relative poverty (32% in 2013). In 2014, a fifth of children under 18 lived in relative poverty as before, while the absolute poverty rate of children has slightly decreased (10% in 2013 and 9% in 2014).

The level of education significantly affects the risk of falling into poverty. Among persons with basic education or lower, every third was in the poorest and only every fourteenth in the richest income quintile. At the same time, one third of people with higher education belonged to the richest fifth. Therefore, the at-risk-of-poverty and absolute poverty rates of persons with higher education (12.9% and 2.8%, respectively) were almost three times smaller than those of persons with basic education or lower (36% and 8.6%, respectively). A higher level of education is an important prerequisite for the prevention of poverty.

More detailed information can be found in the statistics blog (only in Estonian).

At-risk-of-poverty rate is the share of persons with yearly disposable income lower than the at-risk-of-poverty threshold, and absolute poverty rate is the share of persons with yearly disposable income lower than the absolute poverty threshold. The at-risk-of-poverty threshold is 60% of the median yearly disposable income of household members, the absolute poverty threshold is the estimated subsistence minimum. Equalised disposable income is the total household income, which is divided by the sum of equivalence scales of all household members.

The estimations are based on the Social Survey, which has been conducted by Statistics Estonia since 2004. In 2015, more than 5,700 households participated in the survey. The survey collects data about the yearly income, which is the reason why the survey of 2015 asks about the income of 2014. The yearly income is necessary for calculating the indicators of poverty and inequality. Social surveys are conducted by statistical organisations in all European Union countries on the basis of a harmonised methodology by the name of EU-SILC.

Source: Statistics Estonia

Estonia’s tax revenues increased by 7.3 pct in 2015

According to the Ministry of Finance, the state received revenues in the amount of 7.98 billion euros, which is 171.3 million euros more than last year. In comparison to 2014, the state tax revenues increased by 483.1 million euros or by 7.3 percent.

Expenditures increased by 7.2 percent up to 8.33 billion euros in comparison to last year. The highest increase, 23.8 percent, was in state investments. EU funds and other subsidies were used less than in the previous year, because the new period for using subsidies has not started in the extent it was expected.

“I would like to thank all the tax-payers, especially all the enterprises that provide jobs for Estonian people,” said Sven Sester, the Minister of Finance of Estonia. “The money in the state budget is the money of the taxpayers and the government uses it for the benefit of the entire Estonian society.”

“The government incurred expenses with the aim of improving Estonia’s security and the economic safety of our families. We ended the 2015 fiscal year with Estonia’s public finances in a good shape,” Sester added.

Tax revenues collected during the year made up about 90 percent of all the state revenues. The Estonian Tax and Customs board collected 7.13 billion euros in taxes, which is 483.1 million euros or 7.3 percent more than in the previous year. The growth was mostly due to the increased revenues from value added tax and social tax. As the largest revenue types of tax revenues, social tax was paid in the amount of 2.39 billion, value added tax in the amount of 1.86 billion and excise duties in the amount of 873.0 million euros. The highest revenue growth was in collecting value added tax (161.4 million euros or 9.5 percent) and social tax (160.4 million euros or 7.2 percent). Transferable taxes were collected in a total amount of 1.19 billion euros, which is 56.2 million euros or 5 percent more than in the previous year.

The total amount of non-tax revenues received by the end of the year was 852.2 million euros, which is 311.8 million euros less than the year before. This decrease was mainly caused by EU funds and other subsidies, whose use decreased by 42.3 percent within the year. During the year, goods and services were sold for 162.5 million euros and other revenues that were received amounted to 148.1 million euros.

8.33 billion euros was allocated for expenses, making the year’s increase of expenses 556.8 million euros. About a half of this increase or 256 million euros constituted  the payments for retirement, healthcare, unemployment insurance and other subsidies. In terms of expenditure types, 4 billion euros for subsidies, 2.54 billion euros for other operational expenditures and 1.44 billion euros for labour and management costs were paid last year.

Labour and management costs increased by 98.4 million euros or by 7.4 percent in comparison to the year 2014. 722.4 million euros were spent on labour costs with an annual increase of 6.9 percent. Management costs included 712.8 million euros or 7.8 percent more than in the previous year. Similarly to the two preceding years, labour and management costs for all types of expenditure were considerably larger for December than the average of previous months, exceeding the average expenditures of the year by 62.5 percent.

468.8 million euros was allocated for investments during the year which is 9.5 percent less than in the previous year. State agencies invested 337.3 million euros which is 23.8 percent more than in the previous year. Investment subsidies, however, were allocated to the extent of 131.6 million euros which is 114 million euros or 46.4 percent less than last year. The more modest figure in the use of investment subsidies is related to the smaller use of foreign financing in comparison to what was planned for the year 2015.

Foreign subsidies with advanced payments were allocated in the amount of 658.9 million euros or 65.5 percent of what was planned. A total of 14 677 projects were executed with EU financial backing in the 2007-2013 programming period. Estonia can use up to 4.4 billion euros of the allocated European Structural and Investment Funds and can apply for an additional 2 billion euros from different special programmes and direct aid funds for the entire on-going 2014-2020 financial period. 109.1 million euros has been paid as subsidies for the new period so far, including 68.6 million euros of structural aid and 40.3 million euros within the framework of the rural development programme. The difference between receipt and disbursement of foreign subsidies in the last year was 288 million euros which also affected the size of the liquidity reserve.

At the end of December, the State Treasury had 1.15 billion euros of liquid financial assets (deposits and bonds), which included 733.1 million euros in the Liquidity Fund and 398.5 million euros in the Stabilisation Fund. Compared to the end of 2014, the total size of liquid assets managed by the State Treasury decreased by 347.6 million euros or 23.3 percent. The size of the resources of the Ownership Reform Reserve fund increased by 5.3 million euros within the year, reaching 14.8 million euros.

By the end of November, the general government nominal budget surplus was 0.3 percent of the GDP or 53.1 million euros. The budget deficit of the central government was 44.8 million euros and the budget deficit of the health insurance fund amounted to 26.6 million euros. The budget of the unemployment insurance fund was in a surplus from the start of the year, growing throughout the period. The budgetary surplus of the unemployment insurance fund was 42.7 million euros at the end of November. The total sum of local government budgets was also in surplus, which constituted 81.8 million euros at the end of November.

Source: Press release by the Ministry of Finance

Economic growth stabilised in Q4

According to Statistics Estonia, the gross domestic product of Estonia increased by 0.7 per cent on a year-on-year basis in Q4 last year. The modest speed of growth is similar to the previous quarter and does not correspond to Estonia’s growth potential. The negative impact of one-off factors should weaken in the near future.

Various unfavourable factors independent of the Estonian economic environment had a negative impact on gross product growth late last year. Warm weather reduced added value in the energy sector, keeping demand and consequently prices low in our market region. Demand for electronic devices was in decline in the second half of the year due to the high level of the reference base. The low price of oil on the global market also reduced the production volumes and sale prices of shale oil. The logistics sector struggled because of smaller foreign trade volumes, while production in the construction sector is restricted by the continuing decrease in the number of new-builds and reconstructions.
Salaries continued to increase at a somewhat lower pace in Q4, and their growth remained below six per cent. Consumer confidence remained more or less stable and retail statistics promise excellent results at the end of the year. In addition to the strong increase in wages, people’s purchasing power was also increased by several extraordinary factors, such as the strong reduction in labour taxes, increase in child allowances and lower fuel prices. Since the confluence of these factors this year is considerably more modest and consumer prices will start going up again, we expect the growth of private consumption to slow down.
The summer growth forecast of the Ministry of Finance did not materialise overall and this year’s developments are also likely to remain weaker than expected, but the reasons for this are largely independent of us. The success of the three aforementioned areas of activity depends significantly on external factors, and Estonia’s export options are also limited by the unavoidable decline in the direction of Russia. Nevertheless, Estonia managed to increase its export footprint last year in terms of other goods. However, the constant acceleration of Estonia’s economic growth calls for improvement in local as well as global economic conditions.
Author: Madis Aben, analyst at the Fiscal Policy Department, Ministry of Finance

The Estonian employment rate was 65.2 pct in 2015

According to Statistics Estonia, the unemployment rate was 6.2%, the employment rate was 65.2% and the labour force participation rate was 69.4% in 2015. The unemployment level was significantly lower and the employment rate and labour force participation rate higher than in 2014. Compared to 2014, labour market indicators improved thanks to the results of the first three quarters, whereas in the 4th quarter the situation changed.

The data of the 3rd quarter of 2015 showed that the main labour market indicators, i.e. the labour force participation, unemployment and employment rate, were nearing a level similar to that of the economic boom. In the 4th quarter, both the labour force participation rate and the employment rate were higher than in the same quarter of the previous year, but the unemployment rate as well as the total number of unemployed persons did not decrease anymore. While in the 4th quarter of 2014 the unemployment rate was 6.3% and the estimated number of unemployed persons was 42,700, then in the 4th quarter of 2015 the corresponding indicators stood at 6.4% and 43,900.

In 2015 compared to 2014, labour market indicators improved thanks to the results of the first three quarters. Despite the fact that, compared to 2014, the total number of working-age persons (15–74-year-olds) decreased by 8,000, the number of persons actively participating in the labour market increased by 9,000, reaching an estimated 683,100 persons. The employment rate rose from 63% to 65.2% and the unemployment rate dropped from 7.4% to 6.2%. Thus, the number of inactive persons continued to decline as well, dropping to an estimated 300,500 persons by 2015. The number of persons employed has consequently increased on account of both unemployed persons and economically inactive persons who have entered the labour market.

There continue to be significant cleavages in labour market indicators depending on the place of residence, sex, age and ethnic nationality. In 2015, the highest employment rate (71%) was recorded in Harju county and the difference compared to Põlva county which had the lowest employment rate (47.6%) exceeded 20 percentage points. In addition to better job opportunities, the result was also influenced by a different age structure. Harju county also had the lowest unemployment rate (5.2%).

In 2015 compared to 2014, both the employment rate of males and that of females improved, but similarly to a previous couple of years the employment rate of males has grown faster, making the employment gap between males and females reach 8 percentage points. While in recent years the unemployment rate of males has been slightly higher than that of females, then in 2015 the gap became nearly non-existent: the unemployment rate was 6.2% for males and 6.1% for females.

In 2015 compared to 2014, the unemployment rate dropped considerably among both young people (15–24-year-olds) and those in prime working age (25–49-year-olds). The unemployment rate of elderly people (50–74-year-olds), however, remained practically the same. The unemployment rate continued to be the highest (13.1%) among young people, which indicates that entering the labour market and staying there is a serious problem for the young. At the same time, a large share of young people is still studying and is not planning to seek employment in the near future.

The employment rate has risen both for Estonians and non-Estonians, but the difference compared to 2014 has remained in the range of 5–6%, with the rate being higher in the case of Estonians. Estonians also had a lower unemployment rate, but the gap between Estonians and non-Estonians has narrowed in recent years. In 2015, the unemployment rate was 5.4% for Estonians and 8% for non-Estonians.

What could be mentioned as the possible reasons for the improved labour market indicators in 2015 compared to 2014 is the impact of the Employment Register on employment, the economic growth of 2014 and the planned Work Capacity Reform. The noticeably slower economic growth in 2015 has also probably already influenced the labour market indicators of the 4th quarter of 2015.Diagram: Unemployment rate of Estonians and non-Estonians, 2005–2015

The unemployment rate is the share of the unemployed in the labour force (the sum of employed and unemployed persons). The employment rate is the share of the employed in the working-age population (aged 15–74). The labour force participation rate shows the share of the labour force in the population aged 15–74. The estimates are based on the data of the Labour Force Survey.

Statistics Estonia has been conducting the Labour Force Survey since 1995 and every quarter 5,000 persons participate in the survey. The Labour Force Survey is carried out by statistical organisations in all the European Union Member States on the basis of a harmonised methodology.

Source: Statistics Estonia

Estonian unemployment rate on the rise

• Employment and unemployment both increased in Q4 of 2015.
• In 2016, we expect unemployment rate to grow and employment to decline a bit.

Unemployment rate increased a bit to 6.4% in the last quarter of 2015 (6.2% in 2015 as a whole). The number of unemployed increased in the last quarter by 1,000 persons over a year to 44,000. Registered unemployment rate has exceeded previous year’s level since August 2015 (the unemployment insurance fund’s data). In January 2016, the number of registered unemployed exceeded previous year’s level by 1,700 persons.

Unemployment rate in Estonia was still low compared to other countries in Europe, where unemployment rate ranged from 25% in Greece and 21% in Spain to below 5% in Germany (November 2015 data from Eurostat).

The annual growth of employment decelerated to 1.4% in Q4 (+2.6% in 2015 as a whole). The number of inactive declined compared to the previous year. The inactivity decreased the most among the retirees, partly because of a higher retirement age.

In 2016, employment is expected to fall a bit, especially in a few export-related sectors that have been struggling with low demand and/or output prices (mining/shale oil industry, transport, manufacturing). A state reform will reduce labour in the public sector. A reduction in the number of public workers and the reorganisation of the social benefits system of the disabled (forcing them to find a job) will lift the number of the unemployed, at least temporarily.

Source: Swedbank

The Estonian economy grew 0.7 pct in 2015 4Q

According to the flash estimates of Statistics Estonia, the gross domestic product (GDP) of Estonia increased 0.7% in the 4th quarter of 2015 compared to the 4th quarter of 2014.

In the 4th quarter of 2015, the seasonally and working-day adjusted GDP increased by 1.2% compared to the previous quarter and by 0.9% compared to the 4th quarter of 2014.

GDP growth in the 4th quarter was positively influenced by net taxes on products. The receipts of value added tax and payments of subsidies increased.

In the 4th quarter of 2015 foreign demand decreased. The export of goods of the total economy decreased at real prices by 4% compared to the 4th quarter of 2014. Additionally, the real import of goods of the total economy decreased 3% compared to the same quarter of the previous year. According to the preliminary estimates, the Estonian foreign trade was influenced the most by the decrease in the exports and imports of mineral products (incl. motor spirit, fuel oils, gas) and electrical equipment.

Diagram: GDP, growth of the export and import of goods compared to the same quarter of the previous year

The flash estimate of economic growth is calculated only by production approach using VAT return information from the Estonian Tax and Customs Board and data from various statistical actions of Statistics Estonia which have been obtained by the time of preparing the estimate. Therefore, the flash estimate may differ from the revised estimates of the GDP, which are based on the respective quarterly data and calculated by expenditure, production and income approach.

The revised GDP estimates for the 4th quarter of 2015 will be published by Statistics Estonia on 10 March.

Source: Statistics Estonia