Economic growth slowed down in the first quarter

According to Statistics Estonia, the gross domestic product (GDP) of Estonia grew by 3.6% in the first quarter of 2018, compared to the same period of the previous year.

In the first quarter of 2018, the Estonian GDP was 5.7 billion euros at current prices.

The seasonally and working-day adjusted GDP did not change (decline of 0.1%) compared to the previous quarter. However, compared to the first quarter of 2017, the seasonally and working-day adjusted GDP grew by 3.8%.

For the fifth quarter in row, one of the main contributors to economic growth was construction. It was followed by transportation and storage, which had its largest contribution in six years. Significant contributions to the growth came also from manufacturing and information and communication activities. The only economic activity that had a notable negative impact on growth was agriculture, forestry and fishing.

Domestic demand grew by 4.4% in the first quarter. The slowing down in the growth of investments that started in the second half of 2017, became a decline in the first quarter – gross fixed capital formation declined by 8%. The main reason was the decline of investments into transportation equipment and machinery and equipment by non-financial enterprises. Final household consumption grew by 2.8%, which is similar to the growth in the second half of last year.

The exports of goods and services grew significantly slower in the first quarter than previously. Compared to the same period of the previous year, the growth was only 0.9%. The main reason was the decline in the exports of goods. The main contributor was the export of fuels and chemicals. The imports of goods and services maintained their growth rate – 5.4%. The main contributor to growth was the imports of motor vehicles, trailers and semi-trailers and miscellaneous machinery and equipment. The share of net exports in the GDP was 0.8% in the first quarter of 2018.

While the number of persons employed grew, the number of hours worked declined slightly in the first quarter. As a result, the growth of productivity per hour worked significantly outpaced GDP growth – by 6.2%. On the other hand, the productivity per person employed grew by 2.8%. The growth of unit labour cost was 5.5% in the first quarter.

Source: Statistics Estonia

Construction volume increased in 1Q by 21 pct

According to Statistics Estonia, in the 1st quarter of 2018 compared to the same quarter of the previous year, the total production of Estonian construction enterprises in Estonia and foreign countries increased 21%. Taking into account only Estonian construction market, construction volume increased 29%.

In the 1st quarter of 2018, the production value of construction enterprises amounted to 559 million euros, of which the production value of building construction was 442 million euros and the production value of civil engineering was 117 million euros. Compared to the 1st quarter of 2017, the volume of building construction increased 27% and the volume of civil engineering by 4%.

Building construction contributed the most to the growth of the domestic construction market. Compared to the same period of the previous year, construction volume increased in new building construction as well as in repair and reconstruction work. The growth was supported also by civil engineering.

The construction volume of Estonian construction enterprises in foreign countries decreased approximately by one-half compared to the 1st quarter of 2017, mainly on account of smaller volume of building construction. Construction volume in foreign countries accounted for 5% of the total volume of construction in the 1st quarter of 2018; the share in the same period a year ago was 11%.

According to the Register of Construction Works, in the 1st quarter of 2018, the number of dwelling completions was 1,676, which is 414 dwellings more than in the same period a year ago. Approximately a half of the completed dwellings were in blocks of flats situated in Tallinn.

In the 1st quarter of 2018, building permits were granted for the construction of 1,524 dwellings, which is 14% less than in the 1st quarter of 2017. The most popular type of building was a block of flats.

The number of completed non-residential buildings was 246 with a useful floor area of 152,000 square metres – these were primarily new industrial and office premises. Compared to the 1st quarter of 2017, both the useful floor area and volume of completed non-residential buildings decreased.

The statistics are based on the questionnaire “Economic activity, quarter”, the submission date of which was 21 April 2018. Statistics Estonia published the quarterly summary in 23 working days. For the statistical activity “Financial statistics of enterprises (quarterly)”, 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

A lot of fish was sold in 2017

According to Statistics Estonia, in 2017, aquaculture enterprises sold 870 tonnes of commercial fish and crayfish, with a total value of 3.7 million euros. The volume of aquaculture production sold in 2017 was highest of the last five years.

In 2017, a record quantity of commercial fish and crayfish was sold. The quantity was only slightly smaller in 2014, when 869 tonnes was sold. The production of commercial fish and crayfish has remained at such a level for the last five years – the volume of aquaculture production sold in 2013 was 733 tonnes, whereas in 2017, the total quantity sold was 6% higher.

Rainbow trout has been cultivated and sold the most in Estonia throughout the years. The share of rainbow trout has increased year by year. In 2013, rainbow trout accounted for 63% of the total quantity of commercial fish and crayfish sold; in 2017, the share was 81%. In 2017, the quantity of rainbow trout sold was 702 tonnes, with a total value of slightly over 2.6 million euros – this was also the highest quantity sold throughout the years.

The European crayfish was sold in the amount of 0.8 tonnes, the production volume has increased 1.2 times compared to 2016. The monetary value of the European crayfish production increased approximately 1.1 times compared to 2016.

In addition to rainbow trout and the European crayfish, other fish species are farmed and sold – the Arctic char, the European eel, the African sharptooth catfish, common carp, wels catfish, sturgeons (the Siberian and Russian sturgeon) and grass carp.

The amount of fish roe for consumption sold in 2017 totalled 3.8 tonnes, which is approximately 1.1 tonnes less than in 2016. The monetary value of sold production decreased 1.1 times. In 2017, the value of sold fish roe for consumption totalled slightly over 115,000 euros, while in 2016, it was 127,800 euros.

In 2017, of the total production of commercial fish and grayfish, 5% was exported, which is 4 percentage points less than in 2016. Mainly the European eel and to a lesser extent the rainbow trout and the European crayfish were exported.

Statistics Estonia collects aquaculture data by surveying all enterprises with the principal or secondary activity of aquaculture. The frame of the surveyed enterprises has been compiled based on the register of enterprises recognised by the Estonian Fish Farmers Association and the Veterinary and Food Board, and on the data of the Statistical Profile. For the statistical activity “Aquaculture”, 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 the statistical activity.

Source: Statistics Estonia

A record 3.5 million museum visits in 2017

Museums continue to be popular in Estonia. According to Statistics Estonia, in 2017, for the first time, there were more than 3.5 million museum visits.

In 2017, there were 242 museums, including branches, in Estonia. Excluding branches, there were 186 museums.

In 2017, there were for the first time slightly over 3.5 million museum visits in Estonia. Compared to 2016, there were 50,000 more visits. As expected, the greatest number of visits took place in Harju county (1.7 million), followed by Tartu county with 900,000 visits and Lääne-Viru county with 230,000 visits.

Visits by foreign tourists accounted for 35% of all museum visits. The share of foreign tourists was biggest in Harju and Saare counties and smallest in Rapla and Järva counties.

In 2017, there were 2,659 museum visits per 1,000 inhabitants in Estonia. According to the European Group of Museum Statistics (EGMUS), this is one of the highest scores in Europe.

Excluding branches, 39% of museums were Estonian private museums, 35% belonged to local governments, 32% were owned by the state and 2% were foreign private museums. Taking branches also into account, one third belonged to the state, one third to local governments and one third were private museums.

While private museums were mostly operating in one location, state museums stood out with many branches: 39 state museums had 69 locations.

Since 2009, the Night of Museums has been organized in Estonia. For one Saturday night in May, museums stay open longer and are free of charge. As 2018 is the centenary of Estonia, this time, the Night of Museums will focus on party traditions. The Night of Museums takes place on May 19 and it is titled “Night of Parties”. More information is available at: https://www.muuseumioo.ee/en

For the statistical activity “Museum”, the main representative of public interest is the Ministry of Culture, commissioned by whom Statistics Estonia analyses the data necessary for conducting this statistical activity. The classification of museums is based on UNESCO classification.

Source: Statistics Estonia

The gender pay gap is 21 pct

According to Statistics Estonia, in October 2017, the average gross hourly earnings of female employees were 20.9% lower than the average gross hourly earnings of male employees. After three years of decrease, the gender pay gap remained at the same level as in the previous year.

In October 2017, the average gross hourly earnings without irregular bonuses and premiums were 6.26 euros for female employees and 7.91 euros for male employees. Compared to 2016, gross hourly earnings increased 3.7% for both female and male employees. While in 2014–2016, the gross hourly earnings of female employees rose faster than the gross hourly earnings of male employees, which is the main reason for the decrease in the pay gap (the difference between the hourly earnings of male and female employees), in 2017, the rise in the gross hourly earnings was equal.

In 2017, the gender pay gap was the biggest in financial and insurance activities (38.2%), where the gross hourly earnings of male employees rose (7.3%) compared to a year earlier, while the gross hourly earnings of female employees remained relatively constant (decreased 1.1%).

After financial and insurance activities, the next biggest pay gaps were recorded in mining and quarrying (31.1%), wholesale and retail trade (28.1%), manufacturing (28.0%) and human health and social work activities (27.9%). The difference between the gross hourly earnings of male and female employees was the smallest in water supply; sewerage, waste management and remediation activities (5.9%), transportation and storage (5.1%) and other service activities (1.1%).

Compared to 2016, the gender pay gap increased the most in financial and insurance activities (5.2 percentage points), transportation and storage (5.1 percentage points) and professional, scientific and technical activities (4.2 percentage points) and decreased the most in other service activities (6.7 percentage points) and in arts, entertainment and recreation (6.6 percentage points). In the past five years, the gender pay gap has decreased the most in other service activities and in education and increased the most in human health and social work activities.

With regard to type of ownership, the pay gap in institutions and enterprises owned by the state and municipalities was smaller than in enterprises owned by Estonian or foreign private entities. This was the case also in previous years. In 2017, the pay gap in state institutions and enterprises was 18.4% and in municipal institutions and enterprises 12.2%, whereas the pay gap in the enterprises owned by Estonian private entities was 19.2% and in the enterprises owned by foreign private entities 30.8%.

The pay gap in the public sector (state and municipal institutions and enterprises) and private sector (enterprises owned by Estonian and foreign private entities) was almost the same – 22.4% and 22.0%, respectively.

In 2017, the pay gap was the biggest in Ida-Viru county (27.9%), followed by Järva (25.6%), Hiiu (25.3%) and Võru (24.0%) counties and the smallest in Saare (11.3%), Põlva (12.9%), Lääne-Viru (14.3) and Rapla (15.0%) counties.

Statistics Estonia and Eurostat use different population to calculate the gender pay gap. Although Eurostat receives data from the statistical offices of the Member States, the pay gap published by Eurostat does not take into account the indicators of enterprises and institutions with fewer than 10 employees; it also excludes the earnings of employees in agriculture, forestry and fishing and in public administration and defence. According to Eurostat’s calculations, the gender pay gap in Estonia is the biggest in the European Union (25.3% in 2016). According to Statistics Estonia, the gender pay gap in Estonia in 2016 was 20.9%, taking into account all enterprises and institutions and all economic activities.

Statistics Estonia has calculated the pay gap since 1994. In 2017, the sample included around 12,300 enterprises, institutions and organisations. The gender pay gap is calculated by deducting the average gross hourly earnings of female employees from the average gross hourly earnings of male employees, divided by the average gross hourly earnings of male employees and expressed as a percentage. The calculated average gross hourly earnings do not include irregular bonuses and premiums.

The statistics are based on the questionnaire “Gender pay gap” (until 2017, the name of the statistical activity was “Wages, annex for October”), the deadline of which was 1 December 2017. For the statistical activity, 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

2017 was the most successful since the economic crisis

• The economy was driven upwards mainly by a burst of growth in demand
• Increased investment is required for the economy to continue to succeed
• An increase in employment rather than in investment has brought the labour market very close to overheating

The year 2017 was a successful one for the Estonian economy. Growth climbed to almost 5%, having been stalled in previous years, and this is one of the fastest rates since the crisis. Growth was boosted by a notable recovery in export markets and faster rises in prices there. The economy also benefited from the rapid growth in the incomes of residents of Estonia, which was reflected in household consumption. Increased demand and a higher price level in both domestic and external markets allowed companies to increase both their turnover and their profits, for the first time in some years. Data on industrial output and from corporate surveys in recent months have shown the rapid growth in the economy continuing at the start of this year too.

Catching up with richer countries will need more investment than has been seen so far. Having fallen for several years, spending on fixed assets increased last year in both the corporate sector and the general government. The increase in general government investment was largely down to more efficient use of structural funds, while companies were encouraged to invest by the much improved state of foreign markets and the goal of increasing output to claim part of the growth in demand. Even so, Estonian companies put a smaller part of their value added into investment, the source of future growth in the economy, than did companies in the other countries of the euro area on average. This means there is still not enough investment activity for Estonia to catch up with the income levels of richer countries.

The labour market is very close to overheating as companies have preferred to increase their number of employees rather than making investments. Low unemployment, a rise in the number of unfilled vacancies, deepening labour shortages, and rapid growth in labour costs are all indicators that the strong growth last year was driven mainly by short-term growth in demand, not by increases in the production capacity of companies or in labour productivity. However, success in exporting and competitiveness and the overall development of the economy depend on productivity.

There has been no clear indication that the competitiveness of exports has declined because of rising wages and production costs.The market share of exported goods and services increased slightly last year and prices have risen more than those of competitors, which is one reason why the trade surplus increased last year. Surveys of exporters do not point to any decline in competitiveness either. However, given the small share that Estonian exports have in foreign markets, it is possible that success in exporting last year was mainly due to the favourable foreign environment and problems will only appear if demand weakens in Estonia’s trading partners.

The success of the economy was also reflected in the state finances. More was taken in VAT and labour taxes than was planned, though the budget for the year as a whole was in deficit and the deficit was larger than forecast. Outgoings exceeding income means that the state contributed to boosting growth in the economy alongside the private sector. Although the deficit was not large, a surplus in the budget instead would have helped to smooth the economic cycle. Forecasts show that growth in the economy will slow in the years ahead, but will still remain above its sustainable level. For this reason it would be wise to plan a surplus in the budget, so that in the longer term it would be possible to support the economy if needed without breaking the budget rules that have been set in place.

Source: Bank of Estonia

The net profit of the banks was 13 pct smaller in 1Q

• Real estate companies have borrowed more in recent months
• The rapid growth in housing and consumption loans to households continued
• The net profit of the banks was 13% smaller in the first quarter than a year ago

Estonian non-financial companies were quite active in borrowing from banks and leasing companies operating in Estonia in March 2018. The 278 million euros of new long-term loans and leases was 11% more than was issued in the same month a year earlier. Lending to real estate companies has particularly increased in recent months, and almost half of the new long-term loans issued in March went to such companies. Companies in transportation and storage also stood out in the first quarter for borrowing more than previously ⁽¹⁾ .

The fast growth in loans and leases to companies and households continued in March. The demand from households for loans remained strong and was driven by rapid wage growth and high levels of confidence, and the total stock of housing loans increased by 6.6% over the year. New housing loans worth 96 million euros were taken, which is a little less than at the same time a year earlier. Meanwhile, the amount taken by households in car leases has increased faster in recent months. This has partly been driven by the change that came in from the start of the year to the taxation of vehicles owned by companies, which has led to company cars being registered to private individuals. The stock of car leases was 18.5% larger in March than a year earlier. Other consumer loans also saw strong growth of 9.5% over the year. Demand for borrowing with overdrafts and credit cards has been weaker as incomes have risen fast and the stock of such loans changed little over the year.

The average interest rates on new loans were at around the same level in the first quarter of this year as in the first quarter of last year. The interest rate on both new housing loans and long-term corporate loans was 2.4% in March.

The good capacity of borrowers to pay their loans meant the loan quality of the banks remained good. The total stock of corporate and household loans overdue for more than 60 days shrank to 135 million euros in March to make up 0.9% of the loan portfolio. The banks have made provisions against possible loan losses, almost entirely covering the loans overdue by more than 60 days.

The deposits of companies and households in banks also grew strongly in March. Bank deposits were 9.4% larger than a year earlier at 13.1 billion euros.

The net profit of the banking sector fell in the first quarter of 2018. Total net profit of 77.5 million euros was earned in the quarter, which was 13% less than a year earlier. The return on assets on an annual basis was 1.2%, which is 0.3 percentage point less than a year previously. Interest income increased, but expenses increased by more. A new income tax regime came in from the start of the year that requires banks to pay income tax on the profit earned during each quarter, increasing income tax expenses. In addition the merger of two banks raised personnel costs and a correction in stock markets created losses from the changes in the market value of financial instruments.

Read more on the Bank of Estonia website

Author: Mari Tamm, Economist at Eesti Pank