The level of financial literacy of the Estonian residents is good

According to the results of the international financial literacy study conducted by the Organisation for Economic Co-operation and Development (OECD), financial knowledge of the Estonian residents is on a good level compared to that in other countries, however, this does not show in their financial behaviour. Although the Estonian residents have a basic knowledge of financial services, their behaviour and attitudes towards financial matters are not corresponding to their knowledge.

In comparison between 30 countries, financial knowledge of the Estonian residents was in the third place, but financial behaviour only in the 24th place. The OECD international financial literacy study used the results of a study conducted and made public in Estonia last year.

The study focused on the analysis and benchmarking of three areas between countries: financial knowledge or wisdom in money matters, financial behaviour and attitudes concerning long-term planning of financial matters. Wisdom in money matters is a set of skills, knowledge and behaviours necessary for making wise decisions in money matters and for ensuring economic well-being for the family. Financial literacy means, for example, the knowledge how to draft a family budget, basic knowledge about investment and an economising and responsible attitude concerning money.

According to the results, it appeared that financial knowledge of the Estonian residents is on a good level as compared with the other countries. In comparison between 30 countries, the Estonian residents hold the third place after Hong Kong and South Korea. Finland follows Estonia in the fourth place. The Estonian residents themselves thought that their knowledge in the area of money matters was lower than the average knowledge in the country  actually, their knowledge was better.

As to the financial behaviour, however, the Estonian residents are only in the 24th place. Hungary, Poland, Turkey, and Brazil rank behind Estonia. The residents of France showed the best results in financial behaviour.

The attitudes of the Estonian residents concerning the planning of money matters rank in the middle of the 30 countries, in the 14th place. The residents of New Zealand hold the first place.

The results of the study indicate the general need to promote financial literacy. The OECD report on financial literacy recommends that Estonia should find possibilities and solutions that influence and improve primarily the financial behaviour of the residents.

The Ministry of Finance, in collaboration with private and public institutions and organisations, has elaborated and is implementing a programme for promoting the financial literacy of the residents of Estonia from 2013-2020. The three main objectives set for this programme are: the residents should be aware of the necessity to plan their financial matters and their attitudes should support wise decision-making in financial matters, the residents should understand the financial services and should know how to arrange their money matters using the financial services in each stage of their lives, and the financial services should be offered responsibly.

The programme highlights the importance of promoting financial education by providing a single framework for the activities relating to the promotion of financial literacy in Estonia. In addition, the programme provides unified objectives for many activities of public and private organisations, and this way the most important courses of action are provided for the current and future initiatives.

A total of 30 countries participated in the study, including 17 OECD member countries. At least 1,000 respondents in age group 18-79 participated from each country.

Please find the 2016 comparative study at the OECD home page. Please find the results and summary of the study conducted and made public in Estonia last year here, on the home page of the Ministry of Finance.

Source: Estonian Ministry of Finance

Estonian Economy and Monetary Policy 3/2016

The Estonian Economy and Monetary Policy is an Eesti Pank review released four times a year that summarises the main recent events in the global and Estonian economies. Twice a year, in June and December, the review also contains the forecast for the Estonian economy for the current year and the next two calendar years. Here is a short summery of the report.

The economy of the European Union and that of the euro area have been moving in the direction of more certain growth in recent years, though growth in the second quarter was again slower than in previous quarters and uncertainty about the future was increased by the referendum in the United Kingdom in June, in which the voters chose to leave the European Union.

Revised data put growth in the Estonian economy at 0.8% in the second quarter, leaving it below its long-term potential.

Although the unit labour cost based real effective exchange rate of the euro has appreciated for Estonia, exporting companies consider their competitiveness in the European Union market and further afield to be stronger than in the beginning of the year

Having fallen for more than two years, prices rose in August and took consumer price inflation back into positive territory.

Strong growth in wage income and consumption has boosted tax revenues. Tax revenues have also been raised by higher excise rates for alcohol, tobacco and fuels.

The main development in commodities markets in the second quarter was the drop in the oil price. It remains higher than it was at the end of last year though.

The euro area economy grew in the second quarter by 0.3% and by 1.6% over the year.

Increasing employment and low energy prices boosted purchasing power and so private consumption, which was again the main factor driving economic growth in the first quarter.

The contribution of investment to economic growth remained positive in the first half of this year, but growth in investment slowed in the second quarter.

Inflation remained close to zero in the euro area in the first half of the year.

Read more from Bank of Estonia website

Taxes raised the price level in September

  • Inflation is low in Estonia, but still amongst the highest in the euro area
  • Without tax rises, prices would have remained at close to the same level as last year
  • Inflation will rise further in the coming months

The rate of increase in consumer price inflation (CPI) in Estonia climbed in September to 1% from 0.3% a month ago. Prices in Estonia were 0.2% higher than in August. The harmonised index of consumer prices (HICP), which also includes purchases made in Estonia by tourists 1, rose by 1.1% in August according to the latest available statistics, this being notably higher than the euro area average and the second highest behind only Belgium. The average inflation rate in the euro area has ranged between 0.2% and 0.4% in recent months. Prices continued to fall in eight euro area countries, or about half of them, in August.

Inflation rose in Estonia for three main reasons, which were rises in excise, state regulated prices, and the low reference base of a year ago for energy prices. Most of the growth in the consumer price index in September over the previous year came from higher excise rates for fuel, alcohol and tobacco, and the rise in those rates added 0.8 percentage point to inflation. The influence of the introduction of free services has also passed out of the calculation by now, having started in 2013 with the change to make public transport in Tallinn free of charge. The effect from the introduction of free higher education passed out this September after three years, having offset the higher inflation caused by tax rises until now. Service price inflation accelerated substantially in September 2014 from 0.2% to 1.9%.

The inflation figure is affected not only by the price changes that occur during the month, but also by the changes in the prices of goods and services 12 months earlier, which is known as the reference base effect. In the second half of last year prices for both oil and food commodities fell very quickly on global markets, but commodities have probably passed the bottom of their fall by now. The reference base effect for prices of motor fuels alone lifted inflation in Estonia by around 0.3 percentage point in August and September, and the effect will increase until the start of the new year. This means inflation will continue to rise even though the global oil price has stabilised in recent months.

1 The main difference between the HICP and the CPI is that the HICP also takes in purchases by tourists within the territory of the country. The HICP is also used as the reference value for price stability in the euro area, and allows a better comparison of changes in the price levels in different countries.

Source: Bank of Estonia

Author: Rasmus Kattai, Economist at Eesti Pank

The surplus on the current account in August was the largest this year

The flash estimate1 put the Estonian current account at 98 million euros in surplus in August 2016. The surplus on the goods and services account was 139 million euros, which was 36 million euros more than at the same time a year earlier. The growth of 12% in goods exports was faster than the 9% in imports, and this reduced the deficit on the goods account to 33 million euros. One factor that raised activity levels in the external economy was that there were more working days in August 2016 than there were in the previous August. Both exports and imports of services were up 8% and the surplus on the services account widened to 172 million euros. Exports of services were brought down by transport services and boosted by travel services and other services, while imports of all the main types of services increased. The net outflow on the primary and secondary income accounts totalled 41 million euros, which was 5 million euros more than at the same time a year earlier.

The sum total of the current and capital accounts was 110 million euros in August. This means that the Estonian economy was a net lender to the rest of the world, so the country as a whole invested more resources abroad than it received from there.


See a better graph here

Source: Bank of Estonia / Eesti Pank Statistics Department

Estonia had 6 pct more hotel visitors in August than a year before

According to Statistics Estonia, in August, domestic and foreign tourists having stayed in Estonian accommodation establishments numbered 417,000, which was 6% more than in August 2015.

In August 2016, 24,000 tourists more used the services of accommodation establishments of Estonia than in the same month of the previous year. The number of foreign and domestic tourists increased by 6% and 5%, respectively, compared to August 2015. Foreign tourists accounted for nearly two-thirds of the total number of tourists. In August 2016, 256,000 foreign tourists used the services of accommodation establishments or 15,000 foreign tourists more than in August 2015. 38% of the foreign tourists came from Finland, 10% from Germany, 8% from Russia and 7% from Latvia. 78% of the accommodated foreign tourists came to Estonia for holidays, 17% were on a business trip and the rest had some other reason for visiting Estonia. Foreign tourists mainly prefer the accommodation establishments of Tallinn (63% of the accommodated foreign tourists), Pärnu city (10%), Tartu city (6%) and Saare county (5%).

In August 2016, domestic tourists having used the services of accommodation establishments numbered 162,000, which were 8,000 domestic tourists more than in August of the previous year. 65% of the domestic tourists were on a holiday trip and 18% on a business trip. 20% of the domestic tourists having used accommodation services stayed in the accommodation establishments of Harju county, 15% in Pärnu county, 9% in Ida-Viru county and 8% in Saare county.

In August 2016, 1,311 accommodation establishments offered services for tourists. 23,000 rooms and 55,000 beds (1,300 beds more than in August 2015) were available for tourists. 56% of the rooms and 47% of the beds were occupied. The average cost of a guest night was 35 euros or two euros more than a year earlier. The average cost of a guest night was 42 euros in Harju county, 36 euros in Pärnu county, 32 euros in Saare county, and 30 euros in Tartu county.

Read more from Statistics Estonia

Bus drivers’ minimum wage to rise 18 pct in 3 years

Following a year of negotiations, the Estonian Transport and Road Workers Trade Union (ETTA) and the Union of Estonian Automobile Enterprises arrived at a a sectoral agreement that will raise bus drivers’ minimum monthly income by 18 percent to 945 euros in three years.

Under the agreement concluded, bus drivers’ minimum monthly income and hourly wage, respectively, will increase to 835 and 3.50 euros next year, 895 and 3.75 euros in 2018, up to 945 and four euros in 2019.

ETTA’s initial demand was for bus drivers’ minimum monthly income to be increased from 800 to 900 euros immediately.

Read more from ERR News

40 km of Tallinn-Tartu highway to be widened to four lanes

According to the Ministry of Economic Affairs and Communications, work on widening Tallinn-Tartu Highway to four lanes between the villages of Kose and Mäo is underway and construction work will begin next summer.

The project plan is currently being prepared for a 25-kilometer stretch of the new road from Kose to Võõbu. When the plan is completed, a procurement tender to find the builder will be announced, likely sometime during the first half of next year. Construction on the project is expected to start during the second half of the year.

Read more from ERR News