The biggest share in exports was held by electrical equipment

According to Statistics Estonia, in June 2017, the exports of goods increased by 11% and imports by 6% compared to June 2016. In the second quarter, compared to the 2nd quarter of the previous year, exports grew 8% and imports 7%.

In June 2017, exports from Estonia amounted to 1.1 billion euros and imports to Estonia to 1.2 billion euros at current prices. The trade deficit was 123 million euros (in June 2016, it was 156 million euros).

The top destination countries of Estonia’s exports in June were Finland (16% of Estonia’s total exports), Sweden (14%) and Latvia (9%). The biggest increase occurred in exports to the Netherlands (up by 34 million euros), Russia (up by 29 million euros) and Germany (up by 21 million euros). In exports to the Netherlands, the exports of mineral products (incl. shale oil), to Russia, the exports of mechanical appliances and to Germany, the exports of electrical equipment (incl. communication equipment) and metal waste increased. The biggest decrease occurred in exports to Sweden (down by 30 million euros), where less electrical equipment was exported.

The biggest share in exports was held by electrical equipment, followed by mineral products, and wood and articles of wood. The greatest increase was in the exports of mineral products (up by 51 million euros), mechanical appliances (up by 25 million euros), and wood and articles of wood (up by 22 million euros). At the same time, the exports of electrical equipment decreased (down by 48 million euros).

The share of goods of Estonian origin in total exports was 72% in June. In June 2017, the exports of goods of Estonian origin increased 8% and re-exports 18%. 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) and wood and articles of wood (incl. coniferous saw-timber, wooden windows and doors).

The main countries of consignment in June 2017 were Finland (13% of Estonia’s total imports), Germany (11%), Lithuania (9%) and Sweden (9%). The biggest increase occurred in imports from Sweden (up by 28 million euros), Latvia, the Netherlands and France (all up by 10 million euros). Imports from Hungary decreased the most.

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

In the 2nd quarter of 2017, exports of goods from Estonia amounted to 3.3 billion euros and imports to Estonia to 3.7 billion euros. The trade deficit in the 2nd quarter was 447 million euros (in the 2nd quarter of 2016, it was 460 million euros). In the first half-year, exports of goods increased by 10% and imports by 11% compared to the same period of the previous year.

In the 2nd quarter of 2017, the growth in exports compared to the same period of the previous year was supported by increased exports of mineral products (up by 141 million euros), wood and articles of wood (up by 47 million euros), and base metals and articles of base metal (up by 37 million euros), which also compensated for the decline in the exports of electrical equipment (down by 83 million euros). In the comparison by countries, exports have increased the most to Russia, the Netherlands and Germany. At the same time, exports to Sweden have decreased the most.

In the 2nd quarter, the growth in imports was significantly affected by an increase in the imports of transport equipment (up by 101 million euros), mineral products (up by 70 million euros) and raw materials and products of chemical industry (up by 45 million euros). The imports of electrical equipment decreased significantly (down by 73 million euros). By countries, imports in the 2nd quarter of 2017 compared to the 2nd quarter of 2016 grew the most from Russia, Sweden and Turkey. Imports from Hungary decreased the most.

Read more from Statistics Estonia

Production increased in the energy sector and manufacturing

According to Statistics Estonia, in June 2017, the production of industrial enterprises increased 15% compared to June 2016. Production increased in the energy sector and mining and quarrying as well as in manufacturing.

The nearly two-fold increase in the production of mining and quarrying compared to the previous year was caused by an extraordinary low amount of oil shale production in June 2016.

In June, manufacturing production was 10% higher compared to the corresponding month of 2016. Production growth was broad-based – in June, production surpassed the volume of June 2016 in two-thirds of the branches of industry. The growth in production was mostly due to an increase in the manufacture of wood, metal and food products and electrical equipment. Production increased also in the manufacture of motor vehicles, machinery and equipment and building materials. Among the branches of industry with larger shares, production fell in the manufacture of electronic products, furniture and textiles.

In June, 66% of the total production of manufacturing was sold to the external market. According to unadjusted data, the sales of manufacturing production for exports increased 3% and sales to the domestic market 17% compared to June 2016.

In June 2017, the seasonally adjusted total industrial production rose 1% compared to the previous month, production in manufacturing increased by 3%.

Compared to June 2016, the production of electricity increased 36% and the production of heat 15%.Volume index of production in manufacturing and its trend

Read more from Statistics Estonia

The turnover of retail trade enterprises increased 5 pct in June

According to Statistics Estonia, in June 2017, the turnover of retail trade enterprises increased 5% at constant prices compared to June 2016. While in May turnover increased 1% compared to the same month of the previous year, in June growth accelerated.

In June 2017, the turnover of retail trade enterprises was 593.1 million euros.

The turnover growth of stores selling manufactured goods accelerated in June. While in May the turnover of these stores increased 5% compared to the same month of the previous year, in June the growth was 11%. Turnover increased in all economic activities. The increase was largest in stores selling via mail order or the Internet, with sales increasing nearly a third (32%) in year-over-year comparison. A higher than average increase in turnover occurred also in other specialised stores, selling mainly computers and their accessories, photography supplies, books, sports equipment, games and toys, flowers, plants, etc. (22%). In June, the turnover of stores selling pharmaceutical goods and cosmetics, which showed a decline in the previous months, resumed growth, increasing 5% compared to the same month of the previous year. After a decline in May, turnover increased also in stores selling textiles, clothing and footwear (6%) and in other non-specialized stores selling predominantly manufactured goods (e.g. department stores) (5%). In June, turnover growth continued also in stores selling household goods and appliances, hardware and building materials (7%) and in stores selling second-hand goods and in non-store retail sale (stalls, markets, direct sale) (2%).

The turnover of grocery stores stayed at the same level compared to June 2016.

The turnover of enterprises engaged in the retail sale of automotive fuel, which showed a decline in April and May, resumed growth in June, increasing 3% compared to June of the previous year.

Compared to the previous month, in June, the turnover of retail trade enterprises increased 2%. According to the seasonally and working-day adjusted data, the growth was 1%. In the six months of 2017 (January–June), 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 five 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

e-commerce purchases up by 25 pct in 2.Q

Individuals in Estonia made an average of 1.1 million cashless payments per day in the second quarter of 2017. The number of payments was 7% and the turnover 8% higher than it was at the same time last year.

75% of the cashless payments initiated by individuals were card payments. 819,000 card payments were made daily in the second quarter, 7% of them outside Estonia. Estonian residents used card payments in 184 countries in the second quarter, the most popular being Finland, Latvia, Russia, Sweden, Spain and the UK. People in Estonia are some of the greatest lovers of card payments in Europe, only surpassed by Denmark, the Netherlands, Finland, Sweden and the UK. The average size of a card payment made by an individual in Estonia was 15.4 euros in the second quarter, which is one of the smallest in Europe, probably because Estonia has not set a floor for the size of a card payment. Card payments made abroad were larger and averaged at 26.8 euros.

The daily average number of payment orders made by individuals in the second quarter was 250,000. Half of them were payments through an internet bank, and the other half were e-invoice standing orders and payment orders through a bank link. The number of e-invoice standing orders has not changed since the changeover from direct debits. In 2013, before the changeover to e-invoice standing orders, the average number of direct debits was 54,000 per day. By the second quarter of 2017, it had remained almost the same at 53,000 payments per day. Most payment orders are domestic, only 0.6% are made to foreign banks.

Figures illustrating the use of online stores stand out among other payment methods. Compared to the same time last year, the number of payment orders made through a bank link* has grown by more than 10% (it is now 50,000 payments per day). A bank link can only be used for domestic purchases. Estonian residents are becoming progressively more active in purchasing from foreign online stores. In the second quarter, individuals made 28,000 e-commerce card transactions every day, which is a 46% increase year-on-year. 91% of online purchases made with a card come from foreign online stores. Data from Omniva and Statistics Estonia confirm that Estonian people are ordering online more and more. Statistics Estonia data also show that in April and May, the sales revenue of stores that sell online or by post grew the most, 30% in a year, compared to the 6% sales revenue increase of retail stores. The largest retail chains in Estonia attest to the fact that e-commerce is growing fast, and most chains have opened or are planning to open their online store soon.

* A bank link is a payment method where an online store directs the customer to pay for a purchase in their internet bank using a pre-filled order.

Cashless payments initiated by individuals through Estonian banks in 2017 Q2 (daily average)
number of payments (thous.) incl. cross-border payments turnover of payments (million euros) incl. cross-border payments
Total of the payments made (A+B+F+G) 1 100 7% 45,7 9%
         incl. card payments (A) 819 7% 13,2 11%
         incl. payment orders (B) 250 1% 30,3 7%
                 internet bank payment orders  (C) 123 1% 17,9 7%
                 e-invoice standing orders (D) 53 0% 1,6 0%
                 bank link payment orders (E) 50 0% 1,4 0%
         incl. e-commerce card transactions (F) 28 91% 1,0 93%
         incl. other (G) 3 0% 1,2 0%
E-commerce transactions (E+F) 78 33% 2,4 38%

 

Number of cashless payments made by individuals

Source: Bank of Estonia

Author: Tiina Soosalu, Eesti Pank Payment and Settlement Systems Department

Banks earned more than 85 mEUR net profit in 2Q

  • Households continued to borrow at a fast pace in June
    The deposits of companies and households were up 11% over the year
    The ability of companies and households to service their loans is good, which keeps bank loan losses low

The stock of loans and leases from banks to companies and households was 6% larger in June than a year earlier at 17.5 billion euros. Loans to households grew faster, but the increase in corporate lending decelerated slightly compared to its previously strong growth.

Compared to last year, companies took out 5% more loans and leases from banks in the second quarter of 2017. The growth of short-term financing became more rapid as economic activity increased. Long-term loans and leases for companies as a whole grew rather modestly at 3%, but the situation varied across sectors. The volume of new loans increased substantially in the industrial, transport and real estate sector, while retail companies took out significantly less in loans than a year ago. The yearly growth in the stock of the corporate loan and lease portfolio slowed down somewhat, to 5.7% at the end of June.

Household borrowing activity has remained strong on the back of improved confidence and increased income. Around 15% more was taken in new housing loans in the last three months than at the same time last year, and 17% more in car leases. The yearly growth in the housing loan portfolio accelerated to 6.2% in June and the growth in the volume of car leases remained high at 14%.

Loan interest rates have not changed much over the past months. The average interest rate on new housing loans increased slightly due to a rise in the interest margin, from 2.3% to 2.4%, but remained low. The average interest rate for long-term loans taken by companies in June was 2.3%.

The share of loans overdue by more than 60 days in the loan portfolio fell to 0.9%. The reduction in overdue loans shows the borrowers’ good ability to service their loans thanks to faster economic growth and still very low base interest rates. The volume of long-term overdue loans fell by around 25% in a year.

Deposits continue to grow rapidly. Estonian companies and households held 12.3 billion euros in deposits at banks at the end of June, which was 11% more than a year before.

Banks earned more than 85 million euros in net profit in the second quarter. The net profit made up 1.4% of assets, which is a bit higher than the level of the past two years. Profitability was mainly supported by net interest income, which grew 6.5% year-on-year. The fact that loan losses continued to be small and administration costs were lower also had a positive impact.

Source: Bank of Estonia (see graphs here)

Author: Jana Kask, Economist at Eesti Pank

Corporate and household debt has started to increase

  • Companies are still borrowing mainly from banks operating in Estonia
  • Household savings continued to increase faster than their debt liabilities in the first quarter
  • Growth in incomes and savings helps to reduce risks arising from credit growth

Corporate debt liabilities were 2.5% larger at the end of the first quarter of 2017 than a year earlier. Investment, which grew rapidly in the first quarter, was mainly financed from companies’ own funds and loans taken from banks operating in Estonia. The amount of foreign money brought in the country in the form of equity and debt capital increased modestly. Faster economic growth caused a slight decrease in the corporate debt burden, or the ratio of debt liabilities to GDP.

The loan liabilities of households increased almost at the same rate as their incomes. Rising wages, low unemployment and low interest rates on loans all encouraged increased demand for loans from households, and their loan liabilities increased by 6%. Both housing and consumption loans from banks and loans from other lenders have increased in volume.

Household savings have also grown quickly thanks to increased incomes and a high propensity to save. The volume of household deposits and cash was 9% larger than a year earlier. There was also growth of more than a quarter over the year in the value of tradeable securities held by households – which was supported by an increase in the price of securities in particular. Despite the rapid growth, the financial savings of Estonian households in relation to incomes are still below the European Union average.

The Estonian economy was still a net lender to the rest of the world in the first quarter: Estonian residents put more funds abroad than they took in from abroad. This means that in line with the trend of the past few years, Estonian residents save a lot and the level of investment in fixed assets is low in spite of the growth in the first quarter.

Source: Bank of Estonia

Author: Taavi Raudsaar, Economist at Eesti Pank

The impact of sanctions on Russian and European economies

According to the working papers of Bank of Estonia: The conflict between Russia and Ukraine that started in March 2014 led to bilateral economic sanctions being imposed on each other by Russia and Western countries, including the members of the euro area. The paper investigates the impact of the sanctions on the real side of the economies of Russia and the euro area. The effects of sanctions are analysed with a structural vector autoregression. To pin down the effect we are interested in, we include in the model an index that measures the intensity of the sanctions. The sanction shock is identied and separated from the oil price shock by narrative sign restrictions. We nd a very high probability that Russian GDP declined as a result of the sanctions. In contrast to that, the effects of the sanctions on the euro area are limited to real effective exchange rate adjustments.

Read more from here ( 5/2017 Konstantin A. Kholodilin, Aleksei Netšunajev. Crimea and punishment: The impact of sanctions on Russian and European economies)