One-off transactions pulled the current account into deficit in January 2017

The flash estimate1 put the Estonian current account at 251 million euros in deficit in January 2017. The cause of the deficit was large one-off import transactions for transport vehicles. The deficit on the goods and services account was 240 million euros. Goods exports grew by 9% and goods imports by 39%, so the deficit on the goods account widened to 342 million euros. Exports of services increased by 12% and imports by 10%, so the surplus on the services account was larger than a year previously at 102 million euros. The net outflow on the primary and secondary income accounts totalled 11 million euros, which was 36 million euros less than a year earlier.

The current and capital accounts were in deficit by a total of 220 million euros in January, meaning Estonia was a net borrower from the rest of the world. Loan liabilities increased and other investment assets were reduced in order to finance the deficit.

1 The quarterly balance of payments is compiled from a combined system of representative primary data sources, including surveys of companies, while the monthly balance of payments draws from a considerably smaller database. Although the monthly report uses as much data available for the month reported as possible, including administrative data sources and reports on international payments, it is subjective to a certain degree, which is why it is called an estimate. Once the quarterly balance of payments is released, the monthly balances of payments are adjusted accordingly. For more on the principles used in compiling the flash estimate, see http://statistika.eestipank.ee/failid/mbo/kiir_mb_eng.html

Eesti Pank publishes the flash estimate of the balance of payments monthly for the last month but one. Eesti Pank will publish the balance of payments for the first quarter of 2017 on 8 June 2017.

Statistical releases are published by Eesti Pank together with statistical data. The release is independent of economic policy releases and is presented separately from them.

 

See better graph here 

Source: Bank of Estonia

Connections between housing prices and housing credit in Estonia

This paper of Bank of Estonia investigates the mutual dependence between housing prices and housing credit in Estonia, a country which experienced rapid debt accumulation during the 2000s and big swings in house prices during that period. We use Bayesian econometric methods on data spanning 2000–2015. The estimations show the interdependence between house prices and housing credit. More importantly, housing credit shocks had a stronger effect on house prices in the period of declining credit turnover. The asymmetry in the linkage between housing credit and house prices highlights important policy implications, in that if central banks increase capital buffers during good times, they can release credit conditions during hard times to alleviate the negative spillover into house prices and the real economy.

Read more here (2/2017 Juan Carlos Cuestas, Merike Kukk. Asymmetries in the interaction between housing prices and housing credit in Estonia)

Transferring public-sector jobs out of Tallinn

During the March 23rd Cabinet meeting, the government discussed a plan for moving 1 000 public sector jobs out of Tallinn, which would affect approximately 40 state authorities. Each ministry presented proposals for its own area of administration, which would coordinate the organizational activities for the transfer of jobs. The exact action plans will be submitted by the ministries, to the Government, in May.

“The Government’s objective is to increase the state’s presence all over Estonia and to make the labour market of the country’s regions more diverse. We have become accustomed to the fact that, outside Tallinn, there are state employees who provide direct services to residents. Developments in technology and e-services also allow so-called backroom officers to work and live in their preferred areas all over Estonia,” said Minister of State Administration, Mihhail Korb.

In the movement of jobs to county centres, the focus is particularly on central government authorities, of which about 55,000 people were employed as of last year; of these, 45 percent are in Tallinn. In particular, the jobs that can be moved to these regions involve day-to-day operations that do not depend on location. The plan isn’t to take the constitutional institutions and ministries, or the agencies providing services to residents and businesses of the capital and of nearby areas, out of the capital. An analysis, taking into account the broader plan, was carried out in 2016 within the framework of the preparation of the analysis of state tasks.

“The plan was drawn up taking into account three important points: the quality of public services must be maintained, restructuring costs should remain within reasonable limits, and particular areas should have the prerequisites needed in order to find the necessary employees,” said Mihhail Korb.

The job functionalities that are most likely to be moved to the various regions are those where a state authority is expanding a branch, or where an entire work unit can be moved, or a partial unit can be located in another city. An example of the branch expansion solution was the State Shared Service Centre, which in addition to Tallinn, has added offices in Tartu and Viljandi.

First, the State Real Estate Ltd (RKAS), together with every Ministry, will map and analyse the real estate opportunities in county centres and cities of particular regions, taking into consideration the necessary conditions for job creation. Then, the RKAS will make proposals for the placement of jobs in the regions in order to have as little impact on operations as possible, or while not inhibiting the activity of the authority at all. At the same time, methods will be used for the placement of various state authorities in one building in order to create synergies between the institutions and provide easier access to public services. After that, the authorities will be able to start preparing the job transfer processes, which are planned to be completed by 2019.

During the debate over moving jobs out of Tallinn, Cabinet members highlighted the need to analyse telework job creation opportunities. The Minister of Public Administration was assigned to analyse, in cooperation with other ministries, the existing practices of the organization of telework, and to provide proposals for opportunities for expanding telework.

The Ministry of Finance will further analyse, in cooperation with the relevant ministries, the options for moving state enterprises and foundations out of the capital. A relevant analysis will be presented to the Cabinet in the autumn of 2017.

Source: Estonian Ministry of Finance

The number of agricultural holdings continues to decrease

According to Statistics Estonia, the preliminary results of the Farm Structure Survey 2016 indicate that there were 16,700 agricultural holdings with at least one hectare of agricultural area or agricultural holdings mainly producing for sale in Estonia, which is approximately 2,500 holdings less than three years ago.

Although the number of dairy and pig farmers has decreased in the last three years, it appears that they have mainly reorganised their activities. The agricultural holdings that have terminated their activities are likely primarily the ones that only maintain their lands, i.e. agricultural holdings with no agricultural production, but whose permanent grassland maintained in good agricultural and environmental conditions is also considered as utilised agricultural area. This is a logical result of administrative restrictions. The agricultural area has not been removed from use, but is now in the possession of active agricultural producers.

Whereas the number of small holdings has decreased many times over a long period (by 6,600 holdings in the last ten years), the size of agricultural area has experienced a growth trend for a while. It has increased by more than 88,000 hectares in ten years, incl. by more than 37,000 hectares in the last three years, and already amounts to 995,000 hectares.

As of 1 September 2016, there were 6,970 holdings in Estonia that kept farm animals, poultry or bees. In the past decade, the number of holdings with animals has decreased by two times. The number of holdings engaged in cattle and pig farming as well as sheep and poultry farming has decreased. Mainly holdings of natural persons with a small number of animals have terminated their livestock farming activities. In the last three years, 790 holdings, i.e. every third, finished keeping dairy herds. Two thirds of them kept 1–2 cows for their own consumption purposes. Especially noticeable is the five-fold decrease in the number of pig farmers. Whereas until 2013 livestock farming increased also in terms of livestock units despite major decline in the number of livestock farmers, in the last three years it has decreased mainly as a result of reduction in dairy herds and pig farming.

As a result of constantly increasing concentration, Estonian agriculture has developed a structure where 1,300 holdings, i.e. 8% of total number of holdings, provide 81% of the total agricultural output. They use 67% of utilised agricultural area and in their possession is 81% of livestock farming, measured in livestock units. Although the number of dairy cows in large holdings has decreased in the past three years, the majority of dairy cows (63%) are still kept in holdings with at least 300 animals. Almost all pig farming is now in large holdings, and 97% of pigs are kept in holdings with at least 1,000 pigs. Poultry farming is also very concentrated in Estonia – 97% of poultry are kept in poultry houses with at least 1,000 poultry.

Despite the continuous decrease in the number of small holdings, their large share still characterises Estonian agriculture. Holdings with economic size less than 4,000 euros constitute 54% of the total number of holdings, but all together they yield less than 2% of total standard output of agricultural holdings. While production concentration into larger holdings is characteristic of the entire European Union, a large share of small holdings with minimum output is more typical of Eastern European countries.

Along with the concentration in production, the share of rented land has increased year by year. While ten years ago, the share of rented land was 55% of agricultural area, it had reached already 65% in 2016. In the past three years, the share of rented land and other tenure (mainly land used free of charge) has increased by 4%. Agricultural land is rented more by larger legal persons. While the share of owned land constituted the majority (77%) of the agricultural area of holdings with less than 10 hectares and about 35% of the agricultural area of holdings with 50 to 100 hectares (the rest being rented land and other tenure), it constituted only about 30% of the agricultural area of holdings with at least 100 hectares, the majority of the agricultural area being rented land.

The Farm Structure Survey 2016 was organised by harmonised methodology and with co-funding from the European Commission in all European Union member states. The Farm Structure Survey provided data also about the labour force of agricultural holdings, production methods and rural development. Statistics Estonia conducted the survey in Estonia. All data about Estonia are published in 2017.

Source: Statistics Estonia

Shipment of goods declined in 2016

According to Statistics Estonia, in 2016, the number of international traffic passengers served by Estonian ports increased by 4%, but the freight volume of ports in tonnes decreased by 4% compared to the previous year.

Last year, the year of marine culture, a record number of passengers used Estonian ports. In 2016, 10.5 million passengers visited Estonian ports by international transport, which is 4% more than in 2015. The growth was mainly due to the increase in the number of passengers travelling between Estonia and Finland, where 8.8 million passengers were served. 164,000 more passengers arrived from Finland and 160,000 more passengers departed to Finland compared to 2015. Between Estonia and Sweden 1.2 million sea passengers were transported, i.e. 3% more passengers compared to the previous year. 498,200 cruise passengers arrived by sea, i.e. 1% more than the year before. 7.7 million passengers used Estonian ships in international sea traffic.

The number of passenger ship calls at Estonian ports in international sea traffic was around 6,250, i.e. 4% more passenger ships (incl. ro-ro passenger ships) than in 2015, and around the same number of cruise ships (285) called at Estonian ports as in 2015. On international routes around 1.9 million vehicles (excl. transit vehicles) were served by ports; 71% were passenger cars and 25% were trucks and trailers.

On main national ship lines around 2.3 million passengers were transported, which is about as much as in 2015. On those lines over 400 ship trips more were made than in 2015. In 2015, there were over 14,800 trips and, in 2016, over 15,200 trips. On Estonian national lines approximately 933,700 vehicles were served by ports.

In 2016, Estonian ports handled 33.6 million tonnes of cargo, which is 4% less, i.e. 1.3 million tonnes less, than a year earlier. 8% less goods were loaded and 7% more goods were unloaded than in 2015. In 2016, around the same number of cargo ships called at Estonian ports as in 2015. The average gross tonnage of cargo vessels totalled about 11,000.

Transportation of goods through the ports declined last year due to a decrease in transit cargo. Transit goods were loaded and unloaded in ports in the amount of 18.1 million tonnes, which is 11% less than in 2015. 12.7 million tonnes of transit cargo were loaded and 5.4 million tonnes unloaded at Estonian ports. Transit cargo loading fell by 18%, but transit cargo unloading increased by 14%. The most frequently handled group of transit goods loaded at Estonian ports was refined petroleum products (7.5 million tonnes), although the transport of these products decreased by a third in a year. The loading of chemicals and chemical products as transit goods amounted to 4.9 million tonnes, which is 17% more than the year before. The most frequently handled group of transit goods unloaded at Estonian ports was also refined petroleum products (4.5 million tonnes), which is 14% more than in 2015.

9.9 million tonnes of goods were transported abroad through ports and 5.6 million tonnes of goods arrived at Estonian ports – 9% and 2% more than in 2015, respectively. Goods transported abroad were mainly products of agriculture and forestry (3.2 million tonnes), a mixture of types of goods transported together (2.9 million tonnes) and products of mining and quarrying (1 million tonnes). Goods that arrived at Estonian ports included primarily a mixture of types of goods transported together (2.8 million tonnes) and products of mining and quarrying (1.4 million tonnes).

Sea container transportation through ports (expressed in TEUs) decreased by 2% compared to the previous year amounting to about 204,400 TEUs in 2016. The number of containers shipped out of Estonian ports on vessels was about 100,300 TEUs and the number received at Estonian ports was 104,100 TEUs.

Source: Statistics Estonia