Estonian Economy

More documents

Recommendations

Info

April 2008 growth and was named as the main constraint by 19 percent of managers in the first quarter of this year, compared with 36 percent in the first quarter of 2007. In the construction sector the ratio of such companies dropped from 51 percent to 8 percent. Insufficient demand was named as the most important factor by 58 percent of construction companies in the latest survey, up from 44 percent in December. The good news is that a third of construction companies are planning to cut prices in the near future. For the government this creates a good backdrop for making investments and the state should consider going on with planned investments despite the harder times that have arrived. • A survey on consumer protection conducted by the Estonian Institute of Economic Research shows that people's awareness of the fact that such a thing as consumer protection law exists has risen to 84 percent, or the same level as in the late 1990s. One-sixth of the population is unaware of the existence of such a law. At the same time, among Russian-speaking respondents those not aware of the existence of the Consumer Protection Act made up nearly a quarter of respondents. One-third of the respondents said they had at least once been disappointed after making a purchase on the basis of an advertisement. MAJOR ECONOMIC INDICATORS • Increase in Estonia's exports and imports slowed down in 2007 compared to 2006 and the annual rate of growth for 2007 was the lowest of the years since the country joined the EU. The export of goods made up 125.5 billion kroons and import 177.1 billion kroons in 2007. In yearly comparison the value of exports increased 4 percent and of imports 6 percent, the smallest such figures for the last four years. The slowdown was partially the result of the rapid growth rate of exports and imports in 2006, when the annual growth rates were 24 percent and 30 percent, respectively. The trade deficit amounted to 51.6 billion kroons, a 11 percent larger figure than in the year before. In 2006, Estonia's foreign trade deficit expanded by as much as 47 percent. The share of EU countries was 70 percent and that of CIS countries 11 percent in exports. Exports to EU countries grew 11 percent compared to 2006 while exports to CIS countries were up 14 percent. In imports the share of EU countries was 78 percent and the share of CIS countries was 13 percent. Imports from EU countries increased 11 percent but imports from CIS countries dropped 13 percent in comparison with 2006. • The number of bankruptcies has considerably increased in Estonia in Q1 compared with the same period last year. If 72 bankruptcy applications were filed to the Harju County Court in the first 3 months of 2007, then this year there were 119 such applications. In the Tartu and Viru County Courts the number of bankrutcy proceedings has not increased. FISCAL POLICY • The inflow of income tax and VAT revenues into the state budget of Estonia in the first quarter of this year was smaller than at the same time a year ago. VAT revenues in the first three months of 2008 totaled 4.694 billion kroons (EUR 299.94 mln), making up 92 percent of the sum collected in Q1 of 2007 and 18 percent of this year's target. The intake of personal and corporate income tax, at 698 million kroons, formed 90 percent of the inflow in the first three months of last year and 8 percent of the sum planned for this year. The personal income tax revenue is at that negative, in other words, tax refunds exceed the sum collected. Corporate income tax revenue in the three months made up almost 18 percent of the year's target. The social tax intake added up to 7.513 billion kroons in the first quarter, 20 percent up from the same period last year and nearly 23 percent of the inflow projected for the current year. Excise taxes totaled 2.281 billion kroons, an increase of 29 percent year-on-year and 22 percent of the 2008 plan. All told, first-quarter tax intake was 18.394 billion kroons or 11 percent more than at the same time last year. LABOUR MARKET • The number of registered unemployed residents in Estonia grew 2.6 percent or by 441 people in March compared with the preceding month to reach 17,181 at the end of the month. Year-on-year, the rate of increase was 20.5 percent. Unemployed people registered with the Labor Market Board made up 2.7 percent of the entire capable population from age 16 to pension age. In the course of the month of March 19,427 people searched for a job via the Labor Market Board and 1,480 jobless people became employed. The number of new job seekers registered as unemployed was 2,957. Unemployed people between ages 16-24 registered with the Labor Market Board numbered 2,126 as of March 31, while people aged over 50 numbered 5,360. Women made up 55.7 percent. The unemployment rate was highest in the southern Valga County, 5.8 percent, and lowest in Tartu County, also in South Estonia, at 1.7 percent. In Harju County, which includes the capital Tallinn, the rate was 1.9 percent. • Fears of Estonian residents as regards unemployment growth are on the rise and consumer confidence continues to be low, a recent survey indicates. 7 percent of respondents considered it possible 2
April 2008 that unemployment would grow considerably and 36 considered it possible that it would grow somewhat. This marks a steep increase compared with the outcome of a similar survey from a year ago. About 10 percent of households are using savings from earlier periods or live on debt, which is a stable ratio for the recent period. Eighty-seven percent of households manage to save a little or make ends meet. While half of consumers have made no changes in their consumption habits as a result of price increases in the past six months, 18 percent of people are buying the same goods in smaller quantities, 23 percent are buying cheaper goods and 11 percent are buying cheaper goods in smaller quantities. At the same time, the financial situation of households remained good in March. PRICES • Estonian consumer prices rose by 10.9 percent year-on-year in March; in February the annual increase was 11.3 percent. Goods were last month 10.1 percent more expensive than in the same month a year ago. Food prices climbed by 14.5 percent and those of manufactured goods, by 6.6 percent. The cost of services increased by 12.6 percent. Regulated prices of goods and services changed by 19.8 percent and non-regulated prices by 8.5 percent last month in annual comparison. The inflation was driven mainly by rising food prices and the increase in the prices of thermal energy, heating materials and motor fuel. Food cost last month 16.7 percent more than in March 2007. Dairy, cereal and meat products accounted for three-fourths of the increase in food prices. The prices of goods and services were on the average 0.8 percent higher in March than in February. Month on month, the CPI was most influenced by rises in the prices of motor fuels, bread and fresh vegetables. Electricity was 2.4 percent cheaper than in February. • The hike in food prices has not affected the share of expenses on food in households' expenses in 2007, Statistics Estonia has found. Similar to the previous year one fourth of the expenses was spent on food and non-alcoholic beverages. In 2007 the average expenses per member of household totaled 4,358 kroons (EUR 278), 17 percent more than the year before. Compared with the year before expenses on food increased by 16 percent, mainly because of higher grocery prices. The share of expenses on food in the structure of expenses made by household members did not change compared with 2006, however, and also the amounts of food items bought did not change. Last year a member of the household spent considarbly more (by one fifth) only on bakery products and vegetables and 14 percent more on dairy products. The share of expenses on transport and leisure time activities sharply increased in the structure of household members' spending. The average monthly expenditure increased in all groups of expenses. Expenses on transport increased the most, by one third. Also expenses on eating out, education, clothes and footwear, leasure-time activities, food and housing increased on year. STATE BUDGET • Estonia continued to have the EU´s lowest government sector debt burden in 2007, or 3.4 % of GDP compared with 4.2 percent of GDP in the year before, Eurostat said. Also having low ratios of government debt to GDP were Luxembourg (6.8 %), Latvia (9.7 %) and Romania (13.0 %). Eight member states had government debt ratios higher than the maximum 60 % of GDP allowed by the Maastricht treaty. • The Estonian government's fiscal policy is slackening, Vice President of the central bank Marten Ross said. In the central bank's opinion, this year will witness a marked slackening of the budget policy. If last year the budget surplus reached almost 3 % of GDP then this year the government's aim is a balanced budget. This course means the government's fiscal policy this year is supportive of economic growth as the share of public spending in relation to GDP will increase. It would be better if the state's budget policy ran counter to the economic cycle. The 2008 state budget should have had a 2 % surplus in relation to GDP from the first and the government should not have planned so large expenditures at all. In the present situation it is even more important to plan the 2009-2012 budgets with smaller outlays, Ross said. FOREIGN ECONOMIC RELATIONS • Estonia and Georgia have started negotiations to launch regular flights between Tallinn and Tbilisi. Interest toward operating the route was expressed by the Georgian carrier Georgian Airways. The attitude of Georgia's ministry of economic development and the aviation authorities toward the opening of an air route between Tallinn and Tbilisi is positive and there's big willingness on both sides to open this air route. Before the route can be opened an aviation agreement has to be signed between the two countries, which may take 3-4 months. The target group for the new route are tourists, businesspeople from Georgia and the Nordic countries, and officials. According to preliminary information, Georgian Airways is prepared to fly between Tallinn and Tbilisi twice weekly. The new route could be opened next year. • According to PM Ansip, problems may emerge in certain projects with the absorption of EU support allocated to Estonia in the previous financing period even though ministers are optimistic. Ansip 3
Page 1: -Volume 12, No. 4 April 2008 Estoni
Page 5 and 6: April 2008 kroons, will go into ren
Page 7: April 2008 declined. Tallink is cur

Estonian Economy

Create successful ePaper yourself

Delete template?

Save as template?