Estonian job vacancy rates likely to increase further

Annual growth of vacancy rate second highest in the euro area 

In the first quarter of 2017, the rate of vacant jobs in Estonia was slightly above the euro area average, but the annual growth of the vacancy rate was the second highest among 19 countries. This raises the question of whether there is a boom in the labour market that could drive excessive wage growth and a possible loss in export competitiveness. In 2015, the vacancy rate in state-offered positions started to increase, and, since the beginning of 2016, the rate for private entities followed. Foreign-owned companies and the state have the highest job vacancy rates. As foreign entities pay up to 33% more and mainly produce complex products for export, there is a possible skills mismatch.

Beveridge curve suggests no major crisis yet 

Although the job vacancy rate has noticeably increased and shifted the curve upwards, there is no reason yet to believe that we are close to the next crisis. In 2007, wage growth was over 20%, while the job vacancy rate rose to 3.5%, much higher than the 2% we witnessed in the beginning of 2017. Currently, Estonia is situated in a cluster of countries experiencing low unemployment and a medium job vacancy rate.

Service-related activities take a hit 

A comparison of different sectors with their medium-term average level indicates that the situation in service-related activities, especially in administrative/support, accommodations, and food service activities, has worsened the most. The job vacancy rate for the total economy grew from 1.3% in 2010-2015 to 2% in the first quarter of this year.

Job vacancy rates likely to increase further

In Estonia, the unemployment level is rather low and below the natural rate of unemployment. At the same time, the labour force participation rate and employment rates are high. Therefore, all the existing resources have already been more or less utilised and the labour market is tight. In an economic upswing, job vacancy rates are liable to increase further.

Source: Swedbank

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EU ministers discussed the free movement of data

On June 17. in Tallinn, European Union’s Competitiveness and Information Technology Ministers discussed how to better exploit the potential of the European single market through the free movement of data.

“The digital solutions that we use daily in our home countries, for example to communicate with public authorities, should also be available in other countries. I’ve invited my colleagues to think about how to improve the user experience of the single market for both citizens and enterprises,” Kadri Simson, the Estonian Minister of Economic Affairs and Infrastructure said.

The free movement of data to authorities in other countries would mean, for example, that an architect would not need to apply for a business permit to design a house in another Member State. Data already submitted in one member state and verified by the authorities could be made available digitally to the competent authority in another country, which could then immediately identify which qualifications and rights the person had.

“Stimulating the cross-border provision of services has a positive effect on the economy as a whole. It supports the establishment and expansion of businesses and the creation of jobs, and gives consumers more choice at more affordable prices,” Simson explained.

The main objective of the Competitiveness Ministers is to identify obstacles that limit the free movement of data and find ways to move forward.

“For many European countries, the problem is how to create a clear and common legal framework for an EU-wide data economy,” Simson said.

Estonia aims to agree on a general approach for the introduction of e-services during its presidency.

Source: Estonian Ministry of Economic Affairs and Infrastructure

Domestic tourists were a third of customers at hotels in May

According to Statistics Estonia, 297,000 domestic and foreign tourists stayed in Estonian accommodation establishments in May 2017, which is 6% more than in May 2016.

197,000 foreign tourists and 100,000 domestic tourists used the services of accommodation establishments; their numbers increased 3% and 13%, respectively, compared to May of the previous year. 59% of the foreign tourists who used accommodation services came from the neighbouring countries – 84,000 tourists came from Finland, 20,000 from Russia and 13,000 from Latvia. Compared to May 2016, the number of tourists from neighbouring countries increased 3%. The number of Finnish tourists in accommodation establishments fell 4% but the number of Russian and Latvian tourists increased 23% and 36%, respectively, compared to the same month of the previous year. Compared to May 2016, there was also an increase in the number of tourists arriving from Lithuania, the United Kingdom and the United States, while fewer tourists arrived from Sweden, Germany and Norway. 136,000 foreign tourists, or 69% of the foreign tourists who used accommodation services stayed in the accommodation establishments of Tallinn. The second most popular destination was Pärnu city, accounting for 9% of all accommodated foreign tourists, followed by Tartu city, which accounted for 7% of the accommodated foreign tourists. Ida-Viru county and Saare county both accounted for 3% of the foreign tourists who used accommodation services. 71% of the foreign tourists were on a holiday and 22% on a business trip.

One-third of the customers of accommodation establishments were domestic tourists. 59% of them were on a holiday and 30% on a business trip. 29% of the domestic tourists stayed in the accommodation establishments of Harju county, 12% in Pärnu county, 14% in Tartu county and 9% in Ida-Viru county.

In May, 1,130 accommodation establishments offered services for tourists. 21,000 rooms and 49,000 beds were available for tourists. Compared to May of the previous year, there were 22 additional accommodation establishments with more than 1,000 rooms and 3,000 beds. 46% of the rooms and 36% of the beds were occupied. The average cost of a guest night was 40 euros, i.e. two euros more than in the same month of the previous year. The average cost of a guest night was 49 euros in Harju county, 33 euros in Tartu county, 32 euros in Pärnu county and 30 euros in Ida-Viru county.

 Read more from Statistics Estonia

Cigarettes 14.6 pct more expensive than in 2016

According to Statistics Estonia, the change of the consumer price index in June 2017 was -0.1% compared to May 2017 and 2.9% compared to June of the previous year.

Compared to June 2016, goods were 3.2% and services 2.4% more expensive. Regulated prices of goods and services have risen by 3.6% and non-regulated prices by 2.7% compared to June of the previous year.

Compared to June 2016, the consumer price index was affected the most by the 6.6% more expensive food and non-alcoholic beverages, which contributed more than a half of the total growth of the index. Milk, dairy products and eggs were 10.1%, fruit 16.8% and sugar and confectionery 7.3% more expensive than a year earlier. Motor fuel contributed nearly a sixth of the total growth of the index. Compared to June 2016, petrol was 8.5% and diesel fuel 8.4% more expensive. A greater impact on the index was made also by the 14.6% more expensive tobacco products.

In June, compared to May, the consumer price index was affected the most by the seasonal sales of clothing and footwear that started in June and June discounts on alcoholic beverages. A greater impact on the change of the index was made also by the 8.1% more expensive fresh fruit and berries. In June, petrol was 0.5% and diesel fuel 1.1% less expensive than in May.

Change of the consumer price index by commodity groups, June 2017
Commodity group June 2016 – June 2017, % May 2017 – June 2017, %
TOTAL 2.9 -0.1
Food and non-alcoholic beverages 6.6 0.5
Alcoholic beverages and tobacco 4.6 -2.5
Clothing and footwear 0.4 -3.6
Housing 1.2 0.4
Household goods 0.7 0.0
Health 1.0 0.0
Transport 3.1 0.5
Communications -4.7 -0.5
Recreation and culture 0.3 0.2
Education 4.5 0.0
Hotels, cafés and restaurants 6.8 2.5
Miscellaneous goods and services 3.3 -0.4

Statistics Estonia publishes the consumer price index on the 5th working day of each month, after the end of the reporting period. For the statistical activity “Consumer price index”, the main representative of public interest is the Ministry of Finance, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Source: Statistics Estonia

In May, trade intensified due to exports and imports of mineral products

According to Statistics Estonia, in May 2017, the exports of goods increased by 15% and imports by 14% compared to May 2016. Trade growth was influenced the most by a significant increase in the exports and imports of mineral products.

In May 2017, exports from Estonia amounted to 1.2 billion euros and imports to Estonia to 1.3 billion euros at current prices. The trade deficit was 153 million euros (in May 2016, it was 147 million euros).

The top destination countries of Estonia’s exports in May were Finland (16% of Estonia’s total exports), Sweden (14%) and Latvia (9%). The biggest increase occurred in exports to Russia (up by 28 million euros), Canada (up by 23 million euros), Saudi Arabia (up by 20 million euros) and Germany (up by 20 million euros). Exports to Russia and Canada grew mainly due to re-exports but to Saudi Arabia and Germany due to increased exports of goods of Estonia origin. In exports to Russia, the exports of mechanical appliances (incl. excavators, wood and ores processing machines), to Canada, the exports of mineral products (incl. motor spirit), to Saudi Arabia, the exports of mineral products (incl. shale oil) and agricultural products (incl. feed barley) and to Germany, the exports of electrical equipment (incl. communication equipment) increased. The biggest decrease occurred in exports to Sweden (down by 39 million euros), where less electrical equipment was exported.

The biggest share in exports was held by electrical equipment, followed by wood and articles of wood, and mineral products. The greatest increase was in the exports of mineral products (up by 53 million euros), agricultural products and food preparations (up by 28 million euros), mechanical appliances (up by 28 million euros), and wood and articles of wood (up by 24 million euros). At the same time, the exports of electrical equipment decreased (down by 43 million euros).

The share of goods of Estonian origin in total exports was 72% in May. In May 2017, the exports of goods of Estonian origin increased 12% and re-exports 25%. The rise in the exports of goods of Estonian origin was affected the most by an increase in the exports of mineral products (incl. shale oil, electricity), wood and articles of wood (incl. coniferous saw-timber, wood pellets), agricultural products and food preparations (incl. cereals) and miscellaneous manufactured articles (incl. furniture and log houses).

The main countries of consignment in May 2017 were Finland (12% of Estonia’s total imports), Germany (11%), Lithuania (9%) and Sweden (9%). The biggest increase occurred in imports from Russia (up by 41 million euros) and Sweden (up by 17 million euros). Mostly mineral products (incl. motor spirit, fuel oil) were imported from Russia and transport equipment and mineral products (incl. bitumen) from Sweden. Imports from Hungary decreased the most, with less electrical equipment imported.

The main commodities imported to Estonia were electrical equipment, mineral products, transport equipment, agricultural products and food preparations, and mechanical appliances. The biggest increase was in the imports of mineral products and base metals and articles of base metals, and the biggest fall occurred in the imports of electrical equipment.

In May 2017, the foreign trade export volume index increased by 1% and the import volume index by 11% compared to the same period of the previous year.Estonia’s foreign trade by month, 2015–2017

Read more from Statistics Estonia

Estonia to lead the EU budget negotiations

The Council of the EU, the European Parliament and the representatives of the European Commission are meeting today in Brussels to discuss the 2018 EU draft budget for the first time. The negotiations will be led by the Deputy Minister of Finance Märt Kivine.

“The successful approval of the revenue and expenditure of the EU budget for 2018 is one of the priority tasks during the Estonian Presidency of the Council of the EU,” Märt Kivine said. “The Council’s position provides a solid foundation, based on which to agree on such EU budget for 2018 that would take the European Union forward. The Council proposes, in line with its generally frugal approach to the budget, to focus the resources on areas with the highest added value.”

The ambassadors of the member states approved the common position of the Council of the EU with regard to the 2018 EU draft budget on Wednesday. The Council’s position for 2018 provides €158.9 billion for commitments with regard to expenditure. A total of €144.4 billion of the 2018 budget has been planned for payments in the following year, which is 7.4% more than this year.

The Council’s position strongly focuses on measures, which aim to stimulate the creation of jobs and growth, strengthen security and address the migration issue.

In the 2018 budget, the Council wants to contribute to smart and inclusive growth by providing €76.5 billion for commitments, which is 2% more than this year. In doing so, the Council requests to increase its appropriations for commitments in connecting Europe facility by nearly 4%, which would amount to €2.7 billion in support of trans-European networks in transport, energy and communication networks.

According to the Council’s proposal, the Fund for European Aid to the Most Deprived (FEAD) would receive €556.9 million in the following year. The appropriations from structural and investment funds will increase by a quarter, since the regional policy has been successfully implemented in the member states. The payments will increase significantly, because the implementation of the 2014-2020 budget period programmes has reached cruising speed following the initial start-up years.

Source: Estonian Ministry of Finance

Estonian inflation 3 pct in the first half of the year

Inflation accelerated to around 3% in the first half of the year in Estonia. The contribution of food and non-alcoholic beverages increased substantially in recent months. Food and non-alcoholic beverages amount to a quarter of household expenditure, on average. In June, the prices of food and non-alcoholic beverages jumped by 6.6% as dairy products, fruits and confectionery became more expensive. Higher excise taxes pushed up the prices of alcohol and tobacco.

At the same time, the contribution of energy prices has declined in recent months. In June, motor fuels were 8.5% more expensive than last year. Although the average oil price in euros was 5% cheaper than in June last year, excise taxes on fuels have increased.

The purchasing power of wage earners will grow much less this year than in the past. In 2017, the growth of the average wage in real terms is expected to slow to around 3% (the 2013-2016 average was 6.4% per year), as nominal growth of wages will be somewhat slower and prices will rise (by around 3% in 2017). The real growth of the average net wage rose by only 2.6% in the first quarter of this year. This, in turn, will limit households’ consumption. The annual growth of retail trade volumes decelerated to 1.8% during the first five months of 2017. Economic sentiment among consumers remains very strong, however. The financial situation of households is perceived as the strongest in 20 years, for example.

Source: Swedbank

Sales grew in online stores by 33 pct

According to Statistics Estonia, in May 2017, compared to May 2016, the turnover of retail trade enterprises increased 1% at constant prices. For the second month in succession, turnover has shown a stable one-percent growth compared to the same month of the previous year.

In May 2017, the turnover of retail trade enterprises was 586.3 million euros.

The turnover of stores selling manufactured goods increased 5% compared to May 2016. Turnover increased in four and decreased in three economic activities. Turnover increased the most in stores selling via mail order or the Internet, with sales increasing 33% in a year. Turnover increased also in other specialised stores, such as stores selling computers and their accessories, photography supplies, books, sports equipment, games and toys, flowers, plants etc.(19% growth), in stores selling second-hand goods and in non-store retail sale (stalls, markets, direct sale) (3% growth) and in stores selling household goods and appliances, hardware and building materials (2% growth). Compared to May of the previous year, turnover decreased in non-specialized stores selling predominantly manufactured goods (e.g. department stores), in stores selling textiles, clothing and footwear and in stores selling pharmaceutical goods and cosmetics.

The turnover of grocery stores decreased 1% compared to May 2016. The turnover fall in these stores was partly influenced by the acceleration in the price increase of food products.

The turnover of enterprises engaging in the retail sale of automotive fuel decreased 1% compared to May of the previous year.

Compared to the previous month, in May, the turnover of retail trade enterprises increased 9%. According to the seasonally and working-day adjusted data, turnover stayed at the same level compared to the previous month. In the five months of 2017 (January–May), the turnover of retail trade enterprises increased 2% compared to the corresponding period of the previous year.

Turnover volume index of retail trade enterprises and its trend

The statistics are based on the VAT declaration data of the Estonian Tax and Customs Board. Statistics Estonia published the monthly summary in four working days. For the statistical activity “Economic indicators of trade enterprises”, the main representative of public interest is the Ministry of Economic Affairs and Communications, commissioned by whom Statistics Estonia performs this statistical activity.

Source: Statistics Estonia

The current account was close to balance in April 2017

The flash estimate1 put the Estonian current account at 9 million euros in deficit in April 2017. The surplus on the goods and services account was 21 million euros, which was 16 million euros less than a year earlier. Goods exports were down by 3% over the year and imports by 1%, meaning the deficit on the goods account widened by 22 million euros to 109 million euros. One cause of the decline in foreign trade in April 2017 was that there were two fewer working days than in the previous April. The surplus on the services account was 130 million euros, which was 6 million euros more than at the same time a year earlier. Services exports grew by 8% and imports by 9%. The net outflow on the primary and secondary income accounts increased by 10 million euros to 30 million euros.

The current and capital accounts were in surplus by a total of 5 million euros in April, meaning Estonia was again a net lender to the rest of the world.

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.

Source: Bank of Estonia

Household borrowing grows strongly

  • Corporate loan and leasing portfolio grew 6.3% year on year, comparable to the previous months
  • The number of new housing loan agreements signed in May was 12% up from last year
  • Both corporate and household deposits continued to show a strong growth

Corporate and household borrowing from the banks and leasing companies operating in Estonia increased in May 6.3% year on year, in line with the previous months. While y-o-y growth in the corporate loan and lease portfolio slowed slightly relative to the previous months, housing loans were gathering pace. The total loan and leasing portfolio increased in the month by EUR 90 million to EUR 17.5 bn.

The corporate loan and leasing portfolio increased in May by 6.3% year on year. The fastest rise was recorded for companies in the trade, agriculture and transport and warehousing sectors. New long-term loans were issued to companies in the value of EUR 237 million, 7% up from last year’s figure. Manufacturing companies have taken more long-term loans in the recent months than a year ago.

The y-o-y growth in the housing loan portfolio increased to 6.1% in May. The number of housing loan agreements signed was 12% up from last year’s figure, while the average loan amount grew by 4%. Similarly to previous months, household car leasing went up in May, gaining 14% on a year earlier. The demand for loans and leases is backed by a relatively rapid growth in household income and low interest rates.

The average interest rate on housing loans has not changed in the past months. Since February, the average interest rate for new housing loans has stood steady at 2.3%. The average interest rate for corporate loans was 2.4% in May, also in line with the average figure for recent months.

Deposit growth was picking up and continues to outpace the growth of the loan and lease portfolio. Corporate deposits grew in May by 15% compared to a year earlier. Household deposits have similarly shown a strong growth, increasing in May by nearly 9% year on year. By contrast, non-resident deposits have shrunk significantly in recent months and stood at EUR 1.5 bn as of the end of May, representing 11% of the total deposit stock.

Author:, Mari Tamm, Economist at Eesti Pank
Source: Bank of Estonia