Companies made 18 pct more profit this year

According to Statistics Estonia, in the 1st quarter of 2017, the total profit of the business sector was 612 million euros, which was 18% more than in the same period the year before.

Compared to the 1st quarter of 2016, total profit increased in almost all economic activities. The biggest contribution to the total profit of the business sector was made by trade and manufacturing enterprises. The growth in the sector’s profit was negatively affected mostly by real estate and transportation and storage enterprises.

In the 1st quarter of 2017, enterprises sold goods and services for 12.7 billion euros, which was 8% more than in the same period of the previous year. The biggest turnover growth was in construction activity. The turnover of trade enterprises, which have the biggest share in the total turnover of the business sector, increased 7%, mainly due to an increase in the turnover of wholesale trade. The growth was supported also by retail and motor trade. The turnover of manufacturing enterprises increased 5% year over year.

Compared to the same period a year before, the total expenditure of enterprises increased 8%, including an 8% increase in personnel expenses. The number of persons employed increased 2% and the number of hours worked stayed at the level of the previous year. The labour productivity of the business sector on the basis of value added amounted to an average of 5,280 euros in a quarter per person employed, i.e. 8% more than in the 1st quarter of 2016.

The investments of enterprises resumed growth. In the 1st quarter of 2017, enterprises invested 573 million euros, which was 28% more than in the same period the year before. The investments were made mostly in machinery and equipment, transport equipment and buildings. The main investors were manufacturing, transportation and storage, and trade enterprises, accounting for more than a half of the total investments of all enterprises. Compared to the 1st quarter of 2016, only investments in the acquisition of buildings fell. Other investments increased, with the biggest increase registered in investments in transport equipment.Total profit of the business sector, 1st quarter 2010 – 1st quarter 2017

The statistics are based on the questionnaire “Economic activity, quarter”, the submission date of which was 21 April 2017. Statistics Estonia published the quarterly summary in 26 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

In 2016 the total profit of the business sector decreased by 10 pct

According to the preliminary data of Statistics Estonia, in 2016 the total profit of the business sector was 2.7 billion euros, which was 10% less than the year before. The business sector’s total profit decreased for second year in a row.

Compared to 2015, the total profit decreased in most economic activities. The biggest contribution to the total profit was made by trade and energy enterprises. The growth in the profit of the business sector was negatively affected mainly by manufacturing, real estate and transportation and storage enterprises. The profit of manufacturing decreased by a third compared to 2015, mainly due to the decrease in profits in the export-oriented manufacture of fuel oil, metal products and wood.

In 2016, enterprises sold goods and services for 50.2 billion euros, which was 2% more than the year before. The biggest growth was in arts, entertainment and recreation. The turnover of trade enterprises, which have the biggest share in the total turnover of the business sector, increased 4%, affected mostly by an increase in the turnover of motor and retail trade. The turnover of manufacturing enterprises increased 2% compared to the year before.

Compared to 2015, the total costs of enterprises increased 3%, including 5% increase of labour costs. The number of persons employed and the number of hours worked increased 3% and 1%, respectively. In 2016, the labour productivity of the business sector on the basis of value added amounted to an average of 21,600 euros per person employed, i.e. 2% lower than in 2015.

The investment activity of enterprises continued to decrease for the fourth year in a row. In 2016, enterprises invested 2.0 billion euros, which is 12% less than the year before. Similarly to 2015, the largest investments were made mainly in equipment and machinery and buildings and structures. The main investors were manufacturing, trade, and transportation and storage enterprises with a half of the total investments of enterprises. Compared to 2015, the investments in transport equipment and computer systems increased. Other investments decreased, with the biggest decrease registered in investments in acquisition of buildings and structures.

In the 4th quarter of 2016, enterprises sold goods and services for 13.2 billion euros, which was 4% more than in the same period of 2015. In the 4th quarter of 2016, enterprises invested 612 million euros, i.e. a fifth less than in the 4th quarter of 2015.Total profit of the business sector, 2002–2016

The statistics are based on the questionnaire “Economic activity, quarter”, the submission date of which was 20 January 2017. Statistics Estonia published the quarterly summary in 24 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

Non-financial corporations’ sector profits decreased

In 2016, non-financial sector profits decreased 10% in Estonia. Profits decreased third year in a row. 

Robust wage growth has contributed to the decrease in corporations’ profits 

The major share of the decrease in profits came from manufacturing, real estate activities and transport sector, while the increase in profits in wholesale trade was by far the strongest among others.

Although the growth of labour costs has decelerated, their share in corporations’ sector turnover has risen to the highest level of the last 15 years (excluding 2009 with recession). At the same time, profitability (the share of profits in turnover) has shrunk to the lowest level of the last 15 years (again, excluding 2009). Thus, robust wage growth and increased labour costs have contributed substantially to the reduction of corporations’ profits. In addition to the higher labour costs, decreased selling prices have been behind the weaker profits, as well.

After two years of decline, corporations’ sector turnover recovered and reached 2% growth in 2016, contributed primarily stronger foreign demand and selling prices. Exports of goods and services increased 4% in nominal terms and producer and export prices started to increase at the end of last year.

Corporations’ investments decreased fourth year in a row 

Despite the corporations’ improving confidence, accelerated increase of their credit portfolio and gradual increase of capacity utilization, non-financial corporations’ investments decreased already fourth year in a row (i.e – 12% in 2016). Approximately half of the contraction of investments came from the energy sector, whereas investments in transport sector increased the most (60%). The share of investments has dropped to the lowest level. Less investments together with the decrease in labour force and weaker productivity growth or even decrease (corporations’ sector productivity has decreased two years in a row) result in less potential economic growth.

Despite the decrease in profits, corporations’ financial situation and their solvency is good 

Although the growth of corporations’ sector credit portfolio has accelerated, decrease in investments and less lending from abroad has restrained the growth of corporations’ debt. Despite the decrease in profits less investments contribute to the increase in liquid assets. Low interest rates contribute to less interest payments and thereby have positive impact on corporations’ solvency. However, the expected increase in investments and receding short-term loans, corporations’ debt liabilities are expected to increase in the coming years. Accumulation of profits has increased corporations’ equity (increase of equity has decelerated) and this does not considerably limit payment of dividends.

Wage growth is expected to exceed productivity growth  

The deceleration of labour costs, increasing selling prices and stronger foreign demand are expected to improve corporations’ sector profits. At the same time, expected recovery of investments will work against it. Although the growth of labour costs has decelerated, shortage of qualified labour force contribute to the robust wage growth at least in the coming few years. Wage growth is expected to exceed productivity growth and thereby possibly impairing corporations’ competitiveness.

Source: Swedbank

Minister: Doing business in Estonia is easy

Sven Sester, the Minister of Finance of Estonia, presented to other eurozone finance ministers the experience and plans of Estonia to make business simpler: for example, using the information on wages already collected, the Tax and Customs Board for compiling official statistics would make it possible to reduce the reporting burden of companies.

“Doing business in Estonia is easy in comparison with many other countries: Estonia ranks first among European countries according to the ease of doing business index of the World Bank,” said Sven Sester. “But we still have a long way to go. The less time and effort entrepreneurs have to spend on bureaucracy, the more time they can commit to their businesses by creating better jobs and growing the wealth of society.

“We will work with the Tax and Customs Board, Statistics Estonia and the central bank to reduce and simplify reporting by companies in such a manner that the same information does not have to be submitted to the state twice. For example, using the information on wages collected by the Tax and Customs Board in national statistics would reduce the reporting burden. Authorities must share data with each other whilst guaranteeing the necessary confidentiality.”

Sester adds that e-residency also helps make simpler business, including cross-border business. “It also motivates us try and find ways of streamlining the identification and authentication of persons, and to provide services that support business also across the borders,” said Sester.

Source: Estonian Ministry of Finance

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

Management must be physically located in the country

The Estonian government approved a proposal on Dec.1, 2016, made by Minister of Justice Urmas Reinsalu in connection with Estonia’s e-residency project, to repeal the requirement that the management board of a company registered in Estonia must be physically located in the country. The change is to take effect in January 2018.

The law will create the opportunity to manage businesses registered in Estonia from abroad. In such situations, however, the company would have to specify a contact person through which a connection to Estonia would be preserved, spokespeople for the Estonian government said.

The new law will also make submitting the email address of the company’s owner to the Central Commercial Register compulsory. Currently about 7 percent, or nearly 14,000 business-owners, have not submitted their email addresses to the centralized register.

Estonia is the first country in the world to provide e-residency, which it launched on Dec. 2, 2014. E-residency is a state-issued secure digital identity for non-residents that allows people living abroad to operate in Estonia’s e-environment and use e-services on par with Estonian residents.

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The turnover of retail trade enterprises was 537 mEUR in October

According to Statistics Estonia, in October 2016 compared to October 2015, the turnover of retail trade enterprises increased 2% at constant prices. The deceleration in turnover growth was influenced the most by enterprises engaging in the retail sales of automotive fuel.

In October 2016, the turnover of retail trade enterprises was 537.4 million euros. The deceleration in turnover growth was influenced the most by enterprises engaging in the retail sales of automotive fuel, where the sales decreased 12% compared to October 2015. The turnover fall in these enterprises was partly influenced by the high reference base of October 2015 and acceleration in the price increase of automotive fuel.

The turnover of grocery stores has been rather stable in recent months. In October, the turnover of these stores remained on the same level as in October 2015.

The turnover of stores selling manufactured goods increased 10% compared to October 2015. Turnover increased in all economic activities. The increase was the biggest in stores selling pharmaceutical goods and cosmetics, with sales having increased 15% compared to October of the previous year. An above-average increase in turnover occurred also in other specialised stores, such as stores selling computers and their accessories, books, sports equipment, games and toys etc. (14% growth). In October, the turnover of non-specialised stores selling predominantly industrial goods (e.g. department stores), having shown a small decline in September, went on an uptrend again and grew 3% compared to the same month of the previous year. Turnover increased also in stores selling textiles, clothing and footwear (6% growth), in stores selling second-hand goods and in non-store retail sale (stalls, markets, direct sale) (7% growth), in stores selling household goods and appliances, hardware and building materials (9% growth) and in stores selling via mail order or the Internet (10% growth).

Compared to the previous month, in October, the turnover of retail trade enterprises increased 3%. According to the seasonally and working-day adjusted data, the growth was 1%. In the ten months of 2016 (January–October), turnover in retail trade enterprises increased 4% compared to the corresponding period of the previous year.

In 2016, to publish monthly statistics on retail trade, Statistics Estonia started to use only the VAT declaration data of the Estonian Tax and Customs Board and stopped data collection with the questionnaire “Turnover”. This reduced the response burden of entrepreneurs and Statistics Estonia’s expenditure on data collection, and increased the use of administrative data. Due to the change in the data source, the monthly news release “Retail trade” will focus on the turnover of retail trade enterprises, instead of the retail sales of such enterprises. Statistics Estonia will continue publishing the retail sales indicator of retail trade enterprises on a quarterly and yearly basis. 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