The Estonian economy grew 2.1% in 2014

According to Statistics Estonia, the gross domestic product (GDP) of Estonia in 2014 increased 2.1% compared to 2013. In the 4th quarter of 2014, the Estonian economy grew 3.0% compared to the 4th quarter of 2013.

2014

In 2014, the GDP at current prices was 19.5 billion euros.

The year was characterised by a slow but steady growth of the Estonian economy. In the 1st quarter the GDP grew 0.5% compared to the 1st quarter of 2013, while in the 4th quarter the year-over-year growth was 3.0%. In total, the Estonian GDP rose 2.1% in 2014.

Trade contributed significantly to the increase in the GDP, mainly due to an increase in value added in retail trade. In addition, manufacturing and professional, scientific and technical activities contributed the most to the GDP growth in 2014. Manufacturing increased mainly due to a growth in the exports of production; there was also an increase in the domestic sales of manufacturing production.

In 2014, the decrease in value added in transportation and storage slowed the Estonian economy down the most. The decline in construction and accommodation and food service activities had a big negative effect on the GDP as well. The construction volumes on the domestic construction market decreased 2%. The value added of construction decreased 4.1% mainly due to a decrease in the construction of structures.

In 2014, the GDP grew faster than the number of hours worked and persons employed (which grew 0.4% and 0.8%, respectively). Therefore, labour productivity per employee and hour worked increased by 1.3% and 1.7%, respectively. At the same time, the labour costs related to GDP production have increased. Unit labour cost grew 6.4% compared to 2013.

Domestic demand grew 4.8%, mainly as a result of changes in inventories and an increase in household final consumption expenditures. There was an increase in all types of inventories, but the increase in the inventories of goods contributed the most to the changes in inventories. The increase in household final consumption expenditures was mostly caused by a growth in the expenditures on food, transport and clothing and footwear.

Real gross fixed capital formation fell 3%, primarily due to a decrease in investments in buildings and structures and in other machinery and equipment. The main positive factor was the growth of investments in transport. Although domestic demand grew faster than the GDP, the total final consumption expenditures, gross fixed capital formation and changes in inventories were smaller than the GDP by output method. The share of domestic demand in the GDP was 99.4%.

In 2014, the real export of goods and services grew 2.6% compared to 2013 in spite of the decrease in the 1st quarter. The import of goods and services increased 2.3% in 2014. The increased export and import of electronic products had the biggest positive impact on Estonian foreign trade.

Net export, i.e. the difference between export and import, was positive in 2014. The share of net export in the GDP was 2.5%, which was higher than in the two previous years.

4th quarter of 2014

The GDP at current prices was 5.1 billion euros in the 4th quarter of 2014. In that quarter, the seasonally and working-day adjusted GDP increased by 1.2% compared to the 3rd quarter of 2014 and by 2.9% compared to the 4th quarter of 2013.

Similarly to the 3rd quarter, the GDP in the 4th quarter of 2014 was driven the most by a rise in manufacturing, Estonia’s biggest economic activity, mainly due to the production of electronic, coke and wood products. Furthermore, the value added in energy and trade also provided important support for economic growth. The increase in value added in trade was supported by the growth of sales by retail trade enterprises.

In the 4th quarter of 2014, the value added of transportation increased at current prices. However, in real terms, transport slowed the Estonian economy down the most. In addition, the decline in the value added of real estate activities and health had a considerable negative effect on the GDP in the 4th quarter.

Domestic demand grew 5.0% in real terms, mainly due to changes in inventories and an increase in household final consumption expenditures. In the 4th quarter, the change in inventories was mainly caused by a growth in the inventories of finished goods. Household final consumption expenditures increased 5.7% at real prices. In the 4th quarter, the decrease in gross fixed capital formation, which began already in the 3rd quarter, continued. The 7% decrease in gross fixed capital formation at real prices was mostly influenced by a decrease in general government investments in buildings and structures, in other machinery and equipment and in military equipment. There was also a decrease in investments in other machinery and equipment made by the sector of non-financial corporations. In the last quarter of 2014, the real export of goods and services increased 6.0% compared to the same quarter of the previous year. At the same time, the real import of goods and services grew 5.9%. Trade was influenced the most by an increase in the export and import of electronic equipment. The share of net export in the GDP was 2.8%.

Diagram: Real growth of GDP and gross fixed capital formation

Statistics Estonia harmonised its revision policy of national accounts estimates with Eesti Pank. The table outlines the correction depth of periods to be revised in 2015.

1st quarter 2015 2nd quarter 2015 3rd quarter 2015 4th quarter 2015
Revision range Max. three quarters Max. one quarter Max. 17 quarters Max. one quarter
Publishing date 11 March 2015 9 June 2015 8 September 2015 9 December 2015
Published period 4th quarter 2014 1st quarter 2015 2nd quarter 2015 3rd quarter 2015
Revised period 1st quarter 2014 up to 3rd quarter 2014, if necessary 4th quarter 2014, if necessary 1st quarter 2011 up to 1st quarter 2015 2nd quarter 2015, if necessary

Compared to the indicators published in December 2014, GDP real growth has been revised upwards by 0.2 percentage points in the 1st quarter, by 0.4 percentage points in the 2nd quarter and by 0.2 percentage points in the 3rd quarter.

Source: Statistics Estonia

Estonia’s economy grew by 2.1% in 2014

Estonia’s GDP growth was revised up. GDP increased by 2.1% in 2014 and by 3.0% in the last quarter of 2014, year on year (initial estimates, published in December, were +1.8% in 2014 and +2.7% in the last quarter).

By sectors, growth in the value added in retail trade, manufacturing and professional, scientific and technical activities contributed the most, while a decrease in the value added in transportation and storage; construction; and accommodation and food services had the biggest negative contributions.

Domestic demand pushed GDP higher due to bigger inventories and household expenditures (mostly on food, transport, and clothing). Inventories increased due to higher consumption but also because of accumulating stocks before a substantial increase in excise taxes. Investments fell by 2.8%, primarily due to a decrease in the investments in the energy sector (who invested heavily in 2013). The exports of goods and services grew by 2.6%, supported by higher export volumes of electronics and logistics services in ports. The imports of goods and services increased at a similar pace, by 2.7%. Due to larger net exports in nominal terms, current account deficit was only 0.1% of GDP in 2014.

GDP is expected to continue growing at a similar pace, by 2%, in 2015. Growth is supported by consumption, which is boosted by a remarkable jump in households’ real incomes because of higher wages, modest inflation, and a decline in labour taxes. In January, retail sales were up by 5%, year on year. The growth of exports and investments will probably remain modest this year. Operating capacity in the manufacturing sector was at its historic average of 68% in January, but the volumes of orders have been declining in recent months.

Although the EU’s economy is showing some positive signs, our region is affected by the economic crisis in Russia, whose GDP is expected to decline by 10% in 2015-2016. The growth of exports of goods to Russia declined by 57% in nominal terms in January, compared with the same month last year, but only around one fifth of Estonia’s exports to Russia is of Estonian origin (the rest are coming from third countries).

Source: Swedbank

Businessman: Estonia is a donor of rich countries

Commenting the recent report by CEED, businessman Indrek Neivelt writes that Estonia’s problem is that it is not receiving assistance from, but contributes to richer countries.

„We are a donor for richer countries,” Neivelt wrote in his blog after the CEED institute published its report “A one-way ticket? Migration in Europe from the perspective of CEE countries” which shows that 5.7 percent of the Estonian population have left Estonia mainly to „Old Europe” in the last decade.

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Estonian Competitiveness Report 2015

Summary of the Estonian Competitiveness report published by the central bank of Estonia

• Estonian consumer price inflation was below average in 2014. Estonian price competitiveness strengthened in the markets of countries in the euro area, where Estonian relative prices fell, but it weakened in several other markets. Price-based competitiveness declined most in relation to Russia, while local inflation was not enough to compensate for the fall in the rouble, meaning that Estonian relative prices increased in the Russian market.

• The IMF methodology for the equilibrium current account position and the real exchange rate implies that the real exchange rate of the euro could be around 6% undervalued for Estonia, which should continue to favour opportunities for growth for Estonian exports.

• Products from different countries compete not only on price but also on other, qualitative, factors. Those European Union countries where prices and costs are rising faster than in other countries managed to increase export market share more.

• The share of Estonian exports of goods and services in global exports increased by a factor of 2.1 in current prices in 2000-2013 and by a factor of 1.5 at constant prices. The most recent data from 2013 show that the market share of Estonian exports was still increasing at current prices but had shrunk slightly at constant prices. This means that the value of Estonian exports only grew because of rises in relative prices.

• The role played by non-price factors in the growth of the market share of Estonian exports is shown by several expert analyses of export quality and complexity. The quality of Estonian exports has improved over the years, and relatively faster than in many other European Union countries. Improved quality allows prices to be raised without any threat to competitiveness.

• The complexity of exports also helps explain how relative growth in export prices shows only improvement in the qualities of export products. This indicates that Estonia is capable of achieving GDP growth that is better than average. Faster growth needs faster movement in the direction of more complex export products.

• Micro-level data show that the export premiums in the productivity and wages of Estonian exporters are large. The productivity of Estonian exporting companies is on average 25% higher than that of non-exporting companies and exporting companies pay 15% higher wages on average. These premiums have shrunk since the recession though.

Source: Eesti Pank

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Companies made 3.3 billion euros profit last year

According to the preliminary data of Statistics Estonia, in 2014 the total profit of the business sector was 3.3 billion euros, which was 3% more than the year earlier. The increase in the business sector’s total profit continued for the fifth year in a row.

Compared to 2013, the total profit increased in almost all economic activities. The biggest contribution to the growth in total profit was made by transportation and storage and information and communication activities. The growth in the profit of the business sector was negatively influenced mostly by construction and wholesale trade activities. The profit of manufacturing, which holds the largest share in the total profit of the business sector, increased 1% compared to 2013, mainly due to the decreased profits in the manufacture of electronics and fuel oil products.

In 2014, enterprises sold goods and services for 50.3 billion euros, which was the same as the year before. The turnover of trade enterprises, which have the biggest share in the total turnover of the business sector, decreased 1%, influenced mostly by a decrease in the turnover of wholesale trade. At the same time, the turnover of retail trade continued to grow. The turnover of manufacturing enterprises increased 4%.

Compared to 2013, the total costs of enterprises also stayed on the same level, while personnel expenses increased 8%. The number of persons employed and the number of hours worked increased 3% and 5%, respectively. The labour productivity of the business sector on the basis of value added amounted to an average of 22,300 euros per person employed in a year and was 4% higher than in 2013.

The investment activity of enterprises continued to decrease for the second year in a row. In 2014, enterprises invested 2.4 billion euros, which is about a tenth less than the year before. Similarly to 2013, the largest investments were made mainly in equipment and machinery and in the construction and alteration of buildings. The main investors were energy, manufacturing, agricultural and transportation and storage enterprises with more than a half of the total investments of enterprises. Compared to 2013, the investments in land, acquisition of buildings and computers increased. Other investments decreased, with the biggest decrease (21%) registered in investments in equipment and machinery.

In the 4th quarter of 2014, enterprises sold goods and services for 13.0 billion euros, which was 2% more than in the same period of 2013. In the 4th quarter of 2014, enterprises invested 768 million euros, i.e. 2% less than in the 4th quarter of 2013.

Diagram: Total profit of the business sector, 2002–2014

 

Source: Statistics Estonia

7,200 job vacancies in Q4

According to Statistics Estonia, there were 7,200 job vacancies in the enterprises, institutions and organisations of Estonia in the 4th quarter of 2014. The number of job vacancies decreased by 15.9% compared to the previous quarter and increased by 13.6% compared to the 4th quarter of 2013.

The rate of job vacancies, i.e. the share of job vacancies in the total number of jobs, was 1.3% in the 4th quarter. For the third quarter in a row, the rate of job vacancies was the highest in administrative and support service activities (2.4%). It was the lowest in mining and quarrying and in water supply, sewerage, waste management and remediation activities (0.1% in each).

The rise in the number of job vacancies was the highest in professional, scientific and technical activities, where there were 2.6 times more job vacancies than in the 4th quarter of 2013.

56% of vacant and occupied posts are in Harju county (including Tallinn), followed by Tartu county (11%) and Ida-Viru county (8%). The rate of job vacancies remained the highest in Harju county (1.7%) and the lowest in Hiiu, Saare and Põlva counties (0.5% in each).

By type of ownership, 26% of job vacancies were in the public sector and 74% were in the private sector, where enterprises with Estonian ownership held the biggest share. The rate of job vacancies was 1.3% in the public sector and 1.4% in the private sector. The public sector also includes companies owned by the state or the local government.

Diagram: Rate of job vacancies

The movement of labour is characterised by labour turnover. In the 3rd quarter of 2014, a total of 89,000 employees were hired or left their jobs, which is a 9.6% increase compared to the same period of 2013. The largest increase in labour turnover compared to the 3rd quarter of 2013 occurred in agriculture, forestry and fishing and in construction (42.6% and 33.5%, respectively).

A job vacancy is a paid post that is newly created, unoccupied or becomes vacant when an employee leaves, and for which the employer is actively trying to find a suitable candidate from outside the enterprise, institution or organisation concerned.

The data are based on the job vacancies and labour turnover survey conducted by Statistics Estonia since 2005. In 2014, the sample included 12,267 enterprises, institutions and organisations; and the data of randomly selected units are imputed to the total population separately in each stratum.

Source:  Statistics Estonia

Imports were at the lowest level of the recent years in January

According to Statistics Estonia, in January 2015, exports from Estonia amounted to 920 million euros and imports to Estonia to 963 million euros at current prices. The previous time that imports were below a billion euros was in December 2011.

In January, exports of goods increased by 1% and imports decreased by 5% compared to January 2014. The trade deficit was 43 million euros and it decreased by 68 million euros compared to January 2014.

In January, the main commodities imported were electrical equipment (22% of Estonia’s total imports), mineral products (12%) and agricultural products and food preparations (10%). The drop in imports was influenced the most by a decrease in the imports of mineral products (down by 19 million euros), transport equipment and agricultural products and food preparations (both down by 18 million euros). At the same time, the imports of electrical equipment increased (up by 27 million euros).

The biggest share in Estonia’s exports in January was held by electrical equipment (a quarter of Estonia’s total exports), followed by mineral products (11%) and wood and products thereof (10%). The increase in exports compared to January 2014 was due to a significant increase in the exports of electrical equipment (up by 48 million euros) and mineral products (up by 7 million euros). The biggest decrease occurred in the exports of agricultural products and food preparations (down by 20 million euros) and mechanical appliances (down by 11 million euros).

The main countries of consignment in January were Finland (15% of Estonia’s total imports), Sweden (12%) and Germany (10%). The main commodities imported were mineral products and electrical equipment (from Finland), electrical and transport equipment (from Sweden) and mechanical appliances and transport equipment (from Germany).The biggest decrease occurred in imports from Finland (down by 30 million euros) and Germany (down by 29 million euros). At the same time, imports from Poland and Russia increased (both up by 12 million euros).

The top destination country of Estonia’s exports in January 2015 was Sweden (21% of Estonia’s total exports), followed by Finland (14%) and Latvia (11%). Electrical equipment and wood and products thereof were the main commodities exported to Sweden; electrical equipment and metals and products thereof were the main commodities exported to Finland; mineral products (incl. electricity) and agricultural products and food preparations were the main commodities exported to Latvia. The biggest increase occurred in exports to Sweden (up by 29 million euros) and the USA (up by 15 million euros). There was also a significant decrease in exports to Russia (down by 53 million euros) and Finland (down by 14 million euros).

In January compared to December 2014, exports stayed at the same level but imports decreased by 14%.

Diagram: Estonia's foreign trade by month

Read more from Statistics Estonia

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