Estonian GDP increased by 1.3 pct in the 3rd quarter

According to the second estimates of Statistics Estonia, the gross domestic product (GDP) of Estonia increased 1.3% in the 3rd quarter of 2016 compared to the 3rd quarter of the previous year. The biggest contribution to GDP growth was made in the economic activity of transportation, followed by trade and the energy sector.

In the 3rd quarter, the GDP at current prices was 5.2 billion euros. The seasonally and working-day adjusted GDP increased by 0.2% in the 3rd quarter compared to the 2nd quarter of 2016 and by 1.3% compared to the 3rd quarter of 2015.

According to second estimates, in the 3rd quarter of 2016, Estonian GDP growth was influenced the most by the value added generated in the economic activity of transportation. In addition, a significant contribution to GDP growth was made in trade and energy activities. Among trade activities, the value added generated in retail trade increased the most, and wholesale trade increased as well. Although the energy sector experienced a fall in the manufacture of gas, the production of the remaining types of energy rose.

In the 3rd quarter of 2016, GDP growth was inhibited the most by agriculture, forestry and fishing, construction, and real estate activities. Although the value added of real estate activities increased at current prices, an increase in prices in this economic activity resulted in a decrease in the value added at constant prices.

Similarly to the previous quarter, the value added of manufacturing (the biggest economic activity in the Estonian economy) had a positive impact on GDP. The manufacture of motor vehicles and electrical equipment had the greatest positive impact. The manufacture of electronic equipment, mineral products, and food products and beverages experienced the greatest fall.

The export of goods and services rose by 5.6% at real prices, mainly due to an increase in the export of electronic products and electrical equipment. The import of goods and services increased by 4.1% at real prices compared to the 3rd quarter of the previous year. The import of goods and services increased the most due to a growth in the import of motor vehicles and chemicals. In the 3rd quarter of 2016, net export amounted 6.9% of GDP, being the highest share in the last 20 quarters.

In the 3rd quarter of 2016, employment fell after having increased for the last 9 quarters, and the number of hours worked remained on the level of the previous year. Productivity of the total economy rose both per person employed and per hour worked. Compensation per employee grew faster than productivity and unit labour costs increased 5.3% compared to the 3rd quarter of the previous year.

Domestic demand fell. Although, at real prices, final consumption expenditures increased, inventories and gross fixed capital formation decreased. In the 3rd quarter of 2016, gross fixed capital formation fell by 8.4% at real prices. The investments of non-financial enterprises as well as the investments of the government sector decreased.

Household final consumption expenditure increased by 3.9%, manly due to a  growth in expenditures on food, transportation and recreation.

Diagram: Real growth of GDP and of domestic demand, compared to the same quarter of the previous year, 1st quarter 2010 – 3rd quarter 2016

Source: Statistics Estonia

The profit of the business sector decreased in the 3rd quarter

According to Statistics Estonia, in the 3rd quarter of 2016, the total profit of the business sector was 856 million euros, which was 4% less than in the same period a year before.

Compared to the 3rd quarter of 2015, total profit decreased in almost all economic activities. The biggest contribution to total profit was made by trade and transportation and storage enterprises. The growth in the profit of the business sector was negatively influenced mostly by manufacturing and information and communication enterprises.

In the 3rd quarter of 2016, enterprises sold goods and services for 12.6 billion euros, which was 2% more than in the same period a year before. The turnover of trade enterprises, having the biggest share in the total turnover of the business sector, increased 3%, influenced mostly by an increase in the turnover of wholesale trade. The growth was supported also by retail and motor trade. The turnover of manufacturing enterprises increased 1%.

Compared to the same period a year before, the total expenditure of enterprises increased 3%, which includes a 5% increase in personnel expenses. The number of persons employed increased 3% and the number of hours worked stayed on the level of the previous year. The labour productivity of the business sector on the basis of value added amounted to an average of 5,800 euros per person employed per quarter, remaining on the level of the previous year.

The investment activity of enterprises continues to be low. In the 3rd quarter of 2016, enterprises invested 487 million euros, which was 14% less than in the same period the year before. The investments were made mostly in machinery and equipment and buildings. The main investors were transportation and storage, manufacturing and trade enterprises, contributing about a half of the total investments of all enterprises. Compared to the 3rd quarter of 2015, only investments in transport equipment increased, while other investments fell.Diagramm: Total profit of the business sector, 1st quarter 2010 – 3rd quarter 2016

The statistics are based on the questionnaire “Economic activity, quarter”, the submission date of which was 20 October 2016. Statistics Estonia published the quarterly summary in 31 working days. For the statistical activity “Financial statistics of enterprises”, the main representative of public interest is the Ministry of Economic Affairs and Communications, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity

Source: Statistics Estonia

The quantity of pesticides placed on the market in Estonia increased by 15 pct

According to Statistics Estonia, 691 tons of pesticides (by active substance) were placed on the market in Estonia in 2015, which was 15% more than in the previous year. The quantity of sold pesticides has been increasing in the last five years.

Compared to 2014, the quantity of pesticides placed on the market in 2015 was 92 tons more, with the greatest increase in the quantity of herbicides and fungicides (46 tons and 23 tons, respectively). Insecticides was the only group of pesticides where sales decreased. Five years ago, in 2011, the quantity of sold pesticides was 461 tons.

In 2015, 8% more pesticides were used in crop production than the year before. Simultaneously, the agricultural land area and yield increased. When comparing the use of pesticides per hectare of cultivated land in the last five years, it has increased from 1.0 kg of preparation in 2011 to 1.1 kg in 2015.

In the agricultural use of pesticides, herbicides made up 69%, of which 68% were used in the production of cereals. In total, the quantity used for cereals was also the largest (251 tons in 2015). In growing industrial crops (rape and turnip rape), 57 tons of pesticides were used.

Pesticides placed on the market are pesticides bought abroad and brought to Estonia for sales. Pesticides are used as weed, plant pest, parasite and insect killers. The characteristics of pesticides — stability, low solubility in water and high solubility in fats — lead to their accumulation in living organisms and food-chains. Depending on the biochemical processes that the pesticides block, their toxicity to human organisms varies (cancerogenic, teratogenic, estrogenic impact). The use of pesticides can fluctuate yearly depending on climate conditions and variability in plant damages and diseases.

For the statistical activity “Sales of pesticides”, the main representative of public interest is the Ministry of Rural Affairs, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting this statistical activity.

Source: Statistics Estonia

The number of job vacancies reached a record high of 11,000

According to Statistics Estonia, there were about 11,000 job vacancies in the enterprises, institutions and organisations of Estonia in the 3rd quarter of 2016. The number of job vacancies reached a 7-year high, having increased by 16% compared to the previous quarter and by 25% compared to the 3rd quarter of 2015.

The rate of job vacancies, i.e. the share of job vacancies in the total number of jobs, was 2.0% in the 3rd quarter of 2016, being 0.3 percentage points higher than in the 2nd quarter of 2016 and 0.4 percentage points higher than in the 3rd quarter of 2015.

In the 3rd quarter, the rate of job vacancies was the highest in administrative and support service activities (4.3%), other service activities (3.1%), information and communication (3.0%) and financial and insurance activities (3.0%). The rate of job vacancies was the lowest in real estate activities, mining and quarrying, construction, and agriculture, forestry and fishing.

The total number of posts and vacant posts continued to be the highest in manufacturing and wholesale and retail trade. Both the total number of posts and the number of vacant posts were the lowest in water supply; sewerage, waste management and remediation activities, in mining and quarrying and electricity, gas, steam and air conditioning supply.

Compared to the 3rd quarter of 2015, the number of job vacancies grew the most in administrative and support service activities. An above-average year-over-year increase was recorded also in education, accommodation and food service activities and manufacturing. Compared to the period a year ago, the number of job vacancies fell the most in professional, scientific and technical activities.

More than a half of the vacant posts were available in Harju County (68%) (including 59% in Tallinn), followed by Tartu County (9%) and Ida-Viru County (6%). The rate of job vacancies was the highest in Harju County and the lowest in Saare and Viljandi counties.

The private sector accounted for around 7,800 job vacancies (70%). In the 3rd quarter of 2016, the rate of job vacancies continued to be the highest in foreign private-sector institutions (2.6%) and state organisations (2.4%). The rate of job vacancies was the lowest in Estonian private sector organisations.Diagram: Rate of job vacancies by economic activity, 3rd quarter, 2015–2016

The movement of labour is characterised by labour turnover (the total number of engaged employees and those who have left), which amounted to 94,000 in the 2nd quarter of 2016, meaning there was a 29% increase compared to the previous quarter and a 22% increase compared to the 2nd quarter of 2015. Compared to the 2nd quarter of 2015, the largest increase in labour turnover occurred in professional, scientific and technical activities and in agriculture, forestry and fishing. In the 2nd quarter, both the number of employees hired and the number of employees who left their job were the highest in wholesale and retail trade, manufacturing, and accommodation and food service activities.

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In October exports from Estonia amounted to 1 bEUR

According to Statistics Estonia, in October 2016, the exports of goods increased by 2% and imports by 3% compared to October of the previous year. Compared to October 2015, the exports of goods of Estonian origin increased by 3% and re-exports, i.e. the exportation of goods imported from a foreign country, stayed at the same level.

In October, exports from Estonia amounted to 1.0 billion euros and imports to Estonia to 1.2 billion euros at current prices. The trade deficit was 151 million euros (in October 2015, it was 129 million euros).

The top destination country of Estonia’s exports in October was Sweden (16% of Estonia’s total exports), followed by Finland (16%) and Latvia (9%). The biggest increase occurred in exports to Mexico and Germany (up by 15 million euros to both), mainly due to increased exports of electrical equipment. Exports to Sweden and Latvia decreased the most.

The biggest share in exports was held by electrical equipment, followed by wood and articles of wood, agricultural products and food preparations. The increase in exports was influenced by the exports of optical, measuring, checking and medical instruments (incl. medical apparatus, measuring instruments, thermostats), electrical equipment (incl. communication equipment) and mineral products (incl. motor spirit, shale oil). There was a decrease in the exports of agricultural products and food preparations and transport equipment.

The share of goods of Estonian origin in total exports was 72% in October. The exports of goods of Estonian origin were influenced the most by a rise in the exports of mineral products (incl. shale oil, electricity) and electrical equipment. Among goods of Estonian origin, the biggest decrease occurred in the exports of agricultural products and food preparations due to decreased exports of cereals and fish, whereas the export of dried peas increased. The biggest share of goods of Estonian origin are exported to Sweden, Finland and Germany. The biggest increase in the exports of goods of Estonian origin was in the exports to Mexico, Togo and Rumania.

The main countries of consignment in October were Finland (12% of Estonia’s total imports), Germany (11%), and the Netherlands (10%). The biggest increase was in imports from the Netherlands, which doubled. Compared to October 2015, more electrical equipment and transport equipment was imported from the Netherlands. The greatest decrease occurred in imports from Finland.

In October, the main commodities imported to Estonia were electrical equipment, transport equipment, agricultural products and food preparations. The growth in imports was influenced the most by the imports of transport equipment. The biggest fall occurred in the imports of mineral products.

In October 2016, export prices increased by 3% and import prices increased by 1%.

Compared to September 2016, exports in October decreased 7% and imports stayed at the same level.

Diagram: Estonia’s foreign trade by month, 2015–2016

Read more from Statistics Estonia

Every 5th person in Estonia lived in relative poverty in 2015

According to Statistics Estonia, in 2015, 21.3% of the Estonian population lived in relative poverty and 3.9% in absolute poverty. The overall percentage of people living in relative poverty decreased 0.3 percentage points compared to the previous year, the percentage of people living in absolute poverty decreased 2.4 percentage points.

At-risk-of-poverty rate is the share of persons with yearly disposable income lower than the at-risk-of-poverty threshold. 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. Equivalised disposable income is the total household income, which is divided by the sum of equivalence scales of all household members.

In 2015, the income of the population increased and income inequality decreased. Social transfers (state benefits and pensions) helped to prevent falling into poverty, as had they not been included in income, 39.2% of the population would have lived in relative poverty and 25.2% in absolute poverty.

In 2015, a person was considered at risk of poverty if his/her monthly equivalised disposable income was below 429 euros (394 euros in 2014), and in absolute poverty if his/her monthly equivalised disposable income was below 201 euros (203 euros in 2014). In 2015, the income of the poorest and the richest quintile of the population differed 5.7 times.

Compared to 2014, the poverty rate has decreased in the case of children, young and middle aged people, but in the case of the elderly, the at-risk-of-poverty rate has increased. In 2015, 40.2% of persons aged 65 and over lived in relative poverty (35.8% in 2014). In 2015, 18.5% of children under 18 lived in relative poverty or one and a half percentage points less compared to the previous year. The absolute poverty rate of children has also decreased – this indicator was 9.1% in 2014 and 4.6% in 2015.

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 (12.4% and 2.0%, respectively) were almost three times smaller than those of persons with basic education or lower (34.8% and 5.0%, respectively). A higher level of education is an important prerequisite for the prevention of poverty.

Source: Statistics Estonia

Linnahall’s €100m makeover to be completed in 2019

Reconstruction of the long-abandoned Linnahall entertainment arena in Tallinn’s port area is expected to be completed in 2019 at a total cost exceeding 100 million euros.

“During the past six months, we worked toward making sure how to proceed,” said Deputy Mayor Taavi Aas, standing in for the mayor, at a press conference on Tuesday. “I am beginning to hope that the grand house with a grand history will come to life again. We have reached an agreement with the government that we will do it together.”

The entertainment and sports arena known as Linnahall, designed by Estonian architect Raine Karp and boasting a seating capacity of 4,200, was completed in time for the sailing events of the 1980 Moscow Olympics, which were hosted in Tallinn. The four-story building has a total enclosed area of 37,000 square meters.

Read more from ERR News

Rural affairs minister resigns after less than two weeks on job

On Monday night, the leadership of the Center Party had begun discussing the matter of Minister of Rural Affairs Martin Repinski continuing in his position as minister following the surfacing of two scandals involving him. Unable to reach a final decision on the matter, they planned to continue discussing the matter on Tuesday evening. Repinski preempted the final decision, however, when he handed in his letter of resignation to Prime Minister Jüri Ratas on Tuesday.

Investigative weekly Eesti Ekspress published an article the day that Ratas’ government was sworn into office alleging that the Repinski-owned Konju Organic Farm had sold goat cheese labeled as an Estonian product despite part of it being ordered from Dutch company De Molkerei. Repinski responded to the allegations by denying any fraud, claiming that no Konju Farm products sold in Estonian stores contained cheese sourced from the Netherlands.

It was then reported on Friday that the Ida-Viru County Court had found Repinski guilty of attempted fraud as a minor. According to the court judgment to which ERR had access, on Aug. 12, 2002, the Ida-Viru County Court found Repinski guilty of attempted fraud in the course of a settlement in a simplified proceeding, sentencing him to a conditional three months in prison and one year of probation. According to Repinski, he was very sorry for what he did.

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Estonia best in Europe’s PISA rankings

Improving its results across the reading, math and science categories compared to its 2012 results and outranked only by Singapore and Japan, Estonia jumped from sixth to third place overall and first place in Europe in the OECD’s freshly released 2015 PISA rankings.

By category, Estonia’s greatest improvement, by nine points, was in the reading category. While Finland performed worse than in 2012 across all three categories, they still outranked Estonia in reading 526-519. Also notable, however, is that Finland’s science and math scores, both of which were above those of Estonia in 2012, had dropped.

The 2015 edition of PISA focused first and foremost on science, in which Estonia likewise ranked third behind Singapore and Japan, outranking Finland and Canada in turn.

According to the most recent PISA results, Estonia’s youth were top ranked in Europe and in the top three globally, and results indicated that Estonia’s schools and teachers had done a good job in helping weaker students, including those of disadvantaged backgrounds, catch up with their peers. Results indicated that the problem-solving skills of Estonian students were among the best in the world, and that student satisfaction with one’s school was at a similar level in Estonia and neighboring Finland and Latvia alike.

Over half a million students from 72 countries participated in the 2015 PISA, including all developed countries.

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Estonian economy is not as bad as it seems from GDP

  • The economy is not doing as badly as it might seem from GDP alone, and additional stimulation might cause harm rather than good
  • Various sources indicate that economic activity increased in the third quarter
  • Further economic growth may be limited by the low rate of corporate investment

The flash estimate from Statistics Estonia shows that the Estonian economy grew in the third quarter by 1.1% year-on-year and 0.2% quarter-on-quarter. The poor harvest in the agricultural sector had a strong negative impact, as the current data put grain production down by one third over the year. In assessing economic activity in the third quarter it is necessary to look at a range of indicators and not focus only on GDP. Further stimulating the economy with government borrowing could under current circumstances lead to higher wage pressures and a further reduction in corporate investment.

Various sources indicate that economic activity increased in the third quarter. VAT declarations indicate that growth in value added among companies was strong in the third quarter. The whole of the industrial sector strengthened, with support primarily from the oil shale sector boosting manufacturing, energy and mining. The oil shale sector strengthened partly because charges for resources were cut. Increased economic activity is also indicated by corporate sentiment surveys. Corporate assessments of output in the previous quarter improved sharply in autumn in both the industrial and construction sectors. Companies working in the construction of facilities were a sector that stood out in sentiment surveys. Retail sales, which have supported economic activity so far, remained strong at the same time.

September was the month when activity strengthened. The signals from the monthly statistics for July and August were mixed and did not show a particular increase in activity, but the figures for September and those that are already available for October are notably stronger. It is too early to say yet from those figures whether they represent a general strengthening in the economic climate, or a temporary phenomenon. Elsewhere in the world some strengthening in economies in the third quarter has been noted. It has come in connection with the construction industry in Europe, while in the USA the strengthening in the third quarter came partly from agricultural exports.

Further economic growth may be limited by the low rate of corporate investment. Corporate investment as a ratio to GDP was about the same in the first half of 2016 as it was in 2009. Such a level is enough to cover amortisation, but it means that notably less new economic potential is being created than before. With investment volumes small, the capacity utilisation rate for the industrial sector climbed to 75% in the fourth quarter. Corporate investment cannot entirely be replaced by general government investment. One reason for the low investment rate is the reduced profitability of companies. Stimulating the economy with money that the government has borrowed could, under current circumstances, raise wage pressures further and lead to a further reduction in profits, as stimulation would primarily affect labour-intensive sectors focused on the domestic economy, where activity is already at a high level. A fall in company profits would in turn reduce corporate investment.

Current growth, in the fourth quarter, is likely to be boosted substantially by people buying in stocks of goods subject to excise in December ahead of the rise in excise rates in January. This impact will however be reversed in the first quarter of next year.

Source: Bank of Estonia

Author: Kaspar Oja, Economist at Eesti Pank