The Estonian Economy newsletter provides the following information:
1) Enterprise investments grew rapidly in 2011 but have slowed in 2012, with manufacturing slowing but energy growing strongly. Investments are being funded more through companies' own funds than loans.
2) Public sector investments are planned to grow 28% in 2012, funded mostly from EU funds and carbon quota sales.
3) Residential real estate transactions and prices have grown steadily for two years, driven by rising costs and demand, though people are relying more on own funds than loans due to low rates. Investments are expected to continue growing if economic conditions remain positive.
The Latvian Economy - No 1, January 17, 2012Swedbank
The Latvian economy experienced strong growth in investments and exports in 2011, contributing significantly to GDP growth. Investments grew 24.6% year-over-year in the first 9 months of 2011 and were concentrated in machinery, equipment, and infrastructure projects. Exports also increased substantially and made up over half of GDP. However, future investment growth depends on the situation in the eurozone, as the Latvian economy remains export-driven. Investments are expected to grow in single digits in 2012 but risks of slowing are present if the eurozone crisis deepens.
The Estonian Economy, No. 1 - June 21, 2012Swedbank
The Estonian economy is expected to see more stable growth in 2012, led by strengthening domestic demand and investments. In the first quarter of 2012, GDP growth slowed to 3.7% year-over-year as export growth declined and imports increased. Private consumption growth remains strong, supported by improving labor market conditions. Investment growth is projected to be robust in 2012, driven by public sector investments financed by EU funds and revenues from carbon quotas, as well as capacity constraints in manufacturing inducing private investments. Exports are expected to grow more slowly in 2012 as demand from trade partners softens.
Flash comment: Estonia - September 7, 2012Swedbank
- According to revised data, Estonia's economic growth slowed to 2.2% in the second quarter from 3.4% in the first, though seasonally adjusted quarterly growth accelerated.
- Domestic demand (6.1% growth) rather than exports drove growth, with high investment (25.8%) but surprisingly weak private consumption (1.9%).
- Construction, retail, and ICT saw the highest sectoral contributions while manufacturing's contribution was negative for the second quarter in a row.
- Revised GDP figures showed a deeper economic crisis and steeper recovery than previously estimated, though first half 2012 growth remained largely the same.
The Lithuanian economy grew 3.9% in the first quarter of 2012, driven by investment and household consumption. Unemployment rose temporarily to 14.5% due to seasonality and global uncertainty. While industrial production grew 6.8% in April, manufacturing growth excluding refined products slowed significantly to 1.7%. Retail trade growth also declined as consumption growth aligned with real wage growth. Unemployment is projected to decrease for the rest of the year, but remain elevated due to high participation and uncertainty.
Latvian GDP growth was 5.9% in the first half of 2012, slowing from previous quarters. Private household consumption growth increased due to rising employment, wages and consumer confidence. Gross fixed capital formation growth remained strong at 20.5% due to infrastructure and capacity investment, although slowing from the first quarter. Export growth slowed to 3.8% while imports growth was 3.7%, resulting in a trade surplus for two consecutive quarters. Overall GDP growth is forecast to be 4% for 2012, slowing in the second half.
The OECD presented a scenario analyzing key global challenges over the next 50 years until 2060. It found that global economic growth will slow, incomes will increase but not fully converge, and the global economy will become more interconnected and multipolar. Emerging economies will shift to higher value industries. Maintaining growth, reducing inequality, and protecting the environment were identified as the three main policy challenges. Achieving future growth will require policies supporting knowledge-based economies, more investment in education, and potentially more progressive redistribution policies. Global resource pressures will also greatly increase even with improvements in resource intensity.
The document summarizes an OECD report which finds that global economic growth remains weak due to low trade, investment, and commodity prices. While monetary policy has been accommodative, fiscal policy in major economies has been contractionary and the pace of structural reforms is insufficient. Collective fiscal action and faster structural reforms are needed to boost global demand and reduce financial stability risks from emerging markets' high debt loads and volatile capital flows.
The Latvian Economy - No 1, January 17, 2012Swedbank
The Latvian economy experienced strong growth in investments and exports in 2011, contributing significantly to GDP growth. Investments grew 24.6% year-over-year in the first 9 months of 2011 and were concentrated in machinery, equipment, and infrastructure projects. Exports also increased substantially and made up over half of GDP. However, future investment growth depends on the situation in the eurozone, as the Latvian economy remains export-driven. Investments are expected to grow in single digits in 2012 but risks of slowing are present if the eurozone crisis deepens.
The Estonian Economy, No. 1 - June 21, 2012Swedbank
The Estonian economy is expected to see more stable growth in 2012, led by strengthening domestic demand and investments. In the first quarter of 2012, GDP growth slowed to 3.7% year-over-year as export growth declined and imports increased. Private consumption growth remains strong, supported by improving labor market conditions. Investment growth is projected to be robust in 2012, driven by public sector investments financed by EU funds and revenues from carbon quotas, as well as capacity constraints in manufacturing inducing private investments. Exports are expected to grow more slowly in 2012 as demand from trade partners softens.
Flash comment: Estonia - September 7, 2012Swedbank
- According to revised data, Estonia's economic growth slowed to 2.2% in the second quarter from 3.4% in the first, though seasonally adjusted quarterly growth accelerated.
- Domestic demand (6.1% growth) rather than exports drove growth, with high investment (25.8%) but surprisingly weak private consumption (1.9%).
- Construction, retail, and ICT saw the highest sectoral contributions while manufacturing's contribution was negative for the second quarter in a row.
- Revised GDP figures showed a deeper economic crisis and steeper recovery than previously estimated, though first half 2012 growth remained largely the same.
The Lithuanian economy grew 3.9% in the first quarter of 2012, driven by investment and household consumption. Unemployment rose temporarily to 14.5% due to seasonality and global uncertainty. While industrial production grew 6.8% in April, manufacturing growth excluding refined products slowed significantly to 1.7%. Retail trade growth also declined as consumption growth aligned with real wage growth. Unemployment is projected to decrease for the rest of the year, but remain elevated due to high participation and uncertainty.
Latvian GDP growth was 5.9% in the first half of 2012, slowing from previous quarters. Private household consumption growth increased due to rising employment, wages and consumer confidence. Gross fixed capital formation growth remained strong at 20.5% due to infrastructure and capacity investment, although slowing from the first quarter. Export growth slowed to 3.8% while imports growth was 3.7%, resulting in a trade surplus for two consecutive quarters. Overall GDP growth is forecast to be 4% for 2012, slowing in the second half.
The OECD presented a scenario analyzing key global challenges over the next 50 years until 2060. It found that global economic growth will slow, incomes will increase but not fully converge, and the global economy will become more interconnected and multipolar. Emerging economies will shift to higher value industries. Maintaining growth, reducing inequality, and protecting the environment were identified as the three main policy challenges. Achieving future growth will require policies supporting knowledge-based economies, more investment in education, and potentially more progressive redistribution policies. Global resource pressures will also greatly increase even with improvements in resource intensity.
The document summarizes an OECD report which finds that global economic growth remains weak due to low trade, investment, and commodity prices. While monetary policy has been accommodative, fiscal policy in major economies has been contractionary and the pace of structural reforms is insufficient. Collective fiscal action and faster structural reforms are needed to boost global demand and reduce financial stability risks from emerging markets' high debt loads and volatile capital flows.
Read and follow the top economic indicators for Vietnam, M&A activity, and major developments in finance, banking, and legal. Published Monthly with contribution from LNT & Partners Law Firm.
The document summarizes the OECD Economic Outlook report. It finds that:
1) The global economy is growing slowly, with world GDP growth below historical averages and weak trade growth.
2) Growth projections vary across countries, with the US expected to accelerate but remain below trend, while China and India are projected to experience slower growth than in recent years.
3) Risks to the outlook are on the downside and include high debt levels in advanced economies and potential slowing of potential growth rates.
The document summarizes recent economic data and sentiment regarding China. It notes that while exports are slowing due to global economic weakness, domestic consumption continues to grow and infrastructure investment may help offset declines in other areas. Recent data shows Chinese GDP growth slowing but not yet at dangerous levels. The outlook expects further slowing but growth still around 8% for 2012, which would not be disastrous. Risks remain from further weakness in Europe or the US hurting Chinese exports.
The document discusses policies to promote faster recovery in the euro area. It finds that weak domestic demand, rather than exports, has held back growth. While some structural reforms have helped potential growth, others are needed to address problems like high unemployment, low inflation, and constrained credit in some countries. The document recommends that monetary, fiscal and structural policies be used in a coordinated manner, with more stimulus from the ECB, greater flexibility of fiscal rules, increased public investment, and further structural reforms to boost potential growth.
The document is an OECD economic survey of China that makes the following key points:
1. China has experienced impressive economic growth that has led to rising incomes, but it is now transitioning to slower, higher quality growth as the "new normal".
2. Significant economic and financial risks exist, but appear to be manageable if China enacts reforms.
3. Future growth will rely more on improving education and skills training to develop human capital. Rural incomes, living standards, and access to services need to be increased to reduce inequalities.
The Estonian Economy, No 7, November 28, 2011Swedbank
The Estonian economy has been heavily reliant on exports and manufacturing, which drove a rapid recovery from the 2008 recession. However, export growth is expected to slow substantially due to high base effects from previous double-digit growth and signs of weaker global demand. Manufacturing output declined sharply in September, with computer and electronics sectors dropping over 40%, pointing to falling export order books. While exports still grew 30% annually in September, much lower growth is expected in coming months due to base effects and softening external demand.
The document discusses the relationship between finance, growth, and inequality. It finds that while finance can boost growth by allocating capital efficiently, too much finance through excessive deregulation or too-big-to-fail guarantees can harm growth. Increases in bank lending were found to have a more negative link to growth than other types of debt. The expansion of finance has also been linked to rising income inequality as the financial sector disproportionately benefits higher income groups through wages and access to credit. The document advocates policies like restricting too-big-to-fail subsidies and implementing macroprudential regulation to achieve healthy financial systems that support inclusive growth.
The Swiss economy is struggling due to the effects of the eurozone debt crisis. Exports have slowed and the strong Swiss franc is hurting competitiveness. Businesses in Switzerland are neutral in their outlook for the economy in the next year, in line with the EU average. While expectations for revenue, profits and hiring are positive, a lack of skilled workers is seen as a major constraint. The economy is forecast to contract slightly in 2012 but recover in 2013 if the eurozone crisis stabilizes and the franc weakens.
The global economy is projected to improve but growth remains moderate, earning it a "B-" grade. Monetary easing, reduced fiscal drag, and lower oil prices support the projected pickup. However, stronger investment is needed to boost demand, potential growth, technology diffusion, and employment. Coordinated monetary, fiscal and structural policies are required to achieve strong, inclusive, sustainable "A" growth.
1) The document examines how pro-growth policies impact economic stability for households.
2) It finds that some reforms like weakening unemployment benefits or tax progressivity can increase household instability, while bolder reforms replacing tight labor and product market regulations can boost growth without harming stability.
3) Tax and benefit systems also significantly impact whether individual earnings losses are attenuated at the household level, with countries having more generous, progressive systems providing greater stability.
The document discusses OECD forecasts during and after the financial crisis. It finds that:
1) Forecasts significantly overestimated growth during the crisis and recovery, missing the severity of the downturn.
2) Forecast errors were largest in vulnerable Eurozone countries and those with lower bank capital and more open economies.
3) The intensification of the Eurozone crisis was a major source of growth forecast errors.
4) Lessons from forecast errors highlight the need to better account for financial factors, global linkages, risks, and avoid "groupthink".
Know how China's Economic Slowdown has a significant impact on key economies that have strong trade ties with the country? Download the Aranca special report on China Slowdown here.
The document is a 2014 economic survey of India by the OECD that makes several recommendations:
1. India's economy is recovering but more reforms are needed to sustain growth above 8%, including reducing subsidies, increasing infrastructure investment, and tax reform.
2. Structural barriers have hampered growth and job creation, especially in manufacturing, and parts of the banking system are vulnerable.
3. Increasing opportunities for women could boost growth by over 2% by raising equity and the number of quality jobs.
4. Public health care is poor for most Indians and increased spending is recommended.
Euro area-european-union-enhancing-european-cooperation-oecd-economic-survey-...OECD, Economics Department
The 2016 OECD Economic Survey of the European Union and Euro Area finds that while macroeconomic policies have become more supportive, demand remains weak and unemployment is very high. It recommends that countries with fiscal space boost growth through budget support, and that monetary policy stay accommodative. It also suggests speeding up the resolution of non-performing loans, promoting non-bank financing, increasing public investment, reducing regulatory burdens, and enhancing labor mobility through increased recognition of qualifications and portability of pensions. Structural reforms across these areas could significantly increase EU GDP.
The OECD interim global economic assessment provides the following key points:
- Global growth prospects have improved slightly compared to previous forecasts due to stronger data, lower oil prices, and monetary easing.
- However, risks remain from inconsistent inflation and interest rates, rapid moves in asset prices, and lagging investment and employment.
- Policymakers need balanced policy packages including stable fiscal policies, reinvigorated structural reforms, and reduced reliance on monetary policy.
Baltic economies: more pain in the past, more gain in the future?Latvijas Banka
Presentation by Dr. Raul Eamets, Professor of Macroeconomics, Head of the Institute of Economics, University of Tartu (Estonia) at the Bank of Latvia conference "Economic Adjustment under Sovereign Debt Crisis: Can Experience of the Baltics Be Applied to Others?"
Riga, November 2, 2012.
The Swedish Economy No.2 - March 29, 2012 Swedbank
The Swedish economy contracted significantly in the fourth quarter of 2011 due to declining external demand, but signs of improvement emerged in early 2012. While GDP growth for 2010 was revised upward, growth in 2011 was weaker than previously reported. Lower productivity growth and household savings than estimated earlier pose challenges for economic analysis and policymaking.
Swedbank's Third Quarter 2011 Results PresentationSwedbank
Swedbank's third quarter 2011 results showed:
1) Net profit of SEK 3.475 billion and a core Tier 1 capital ratio of 15.1%, despite increased macroeconomic uncertainty.
2) Retail banking saw a solid performance with improved net interest income, stable asset quality, good cost control, and high interest rate sensitivity.
3) The group results demonstrated solid core development, with lower fees offset by good cost control and deposit growth, despite negative treasury valuation effects.
4) Liquidity and funding remained strong, with SEK 60 billion in long-term debt issued in Q3 covering USD funding needs for over 12 months.
Swedbank aims to be accessible, welcoming, and have an ongoing dialogue with customers. It strives to make banking easy through various digital and in-person services.
Purchasing Managers' Index Services January 2012Swedbank
Purhasing MAnagers' Index (PMI) is one of Sweden's fastest and most reliable leading economic indicator and it is produced monthly by Swedbank's Economic Research Department and SILF - an purchasing and logistics organisation. The PMI is produced both for the manufacturing industry and for the services sector.
Read and follow the top economic indicators for Vietnam, M&A activity, and major developments in finance, banking, and legal. Published Monthly with contribution from LNT & Partners Law Firm.
The document summarizes the OECD Economic Outlook report. It finds that:
1) The global economy is growing slowly, with world GDP growth below historical averages and weak trade growth.
2) Growth projections vary across countries, with the US expected to accelerate but remain below trend, while China and India are projected to experience slower growth than in recent years.
3) Risks to the outlook are on the downside and include high debt levels in advanced economies and potential slowing of potential growth rates.
The document summarizes recent economic data and sentiment regarding China. It notes that while exports are slowing due to global economic weakness, domestic consumption continues to grow and infrastructure investment may help offset declines in other areas. Recent data shows Chinese GDP growth slowing but not yet at dangerous levels. The outlook expects further slowing but growth still around 8% for 2012, which would not be disastrous. Risks remain from further weakness in Europe or the US hurting Chinese exports.
The document discusses policies to promote faster recovery in the euro area. It finds that weak domestic demand, rather than exports, has held back growth. While some structural reforms have helped potential growth, others are needed to address problems like high unemployment, low inflation, and constrained credit in some countries. The document recommends that monetary, fiscal and structural policies be used in a coordinated manner, with more stimulus from the ECB, greater flexibility of fiscal rules, increased public investment, and further structural reforms to boost potential growth.
The document is an OECD economic survey of China that makes the following key points:
1. China has experienced impressive economic growth that has led to rising incomes, but it is now transitioning to slower, higher quality growth as the "new normal".
2. Significant economic and financial risks exist, but appear to be manageable if China enacts reforms.
3. Future growth will rely more on improving education and skills training to develop human capital. Rural incomes, living standards, and access to services need to be increased to reduce inequalities.
The Estonian Economy, No 7, November 28, 2011Swedbank
The Estonian economy has been heavily reliant on exports and manufacturing, which drove a rapid recovery from the 2008 recession. However, export growth is expected to slow substantially due to high base effects from previous double-digit growth and signs of weaker global demand. Manufacturing output declined sharply in September, with computer and electronics sectors dropping over 40%, pointing to falling export order books. While exports still grew 30% annually in September, much lower growth is expected in coming months due to base effects and softening external demand.
The document discusses the relationship between finance, growth, and inequality. It finds that while finance can boost growth by allocating capital efficiently, too much finance through excessive deregulation or too-big-to-fail guarantees can harm growth. Increases in bank lending were found to have a more negative link to growth than other types of debt. The expansion of finance has also been linked to rising income inequality as the financial sector disproportionately benefits higher income groups through wages and access to credit. The document advocates policies like restricting too-big-to-fail subsidies and implementing macroprudential regulation to achieve healthy financial systems that support inclusive growth.
The Swiss economy is struggling due to the effects of the eurozone debt crisis. Exports have slowed and the strong Swiss franc is hurting competitiveness. Businesses in Switzerland are neutral in their outlook for the economy in the next year, in line with the EU average. While expectations for revenue, profits and hiring are positive, a lack of skilled workers is seen as a major constraint. The economy is forecast to contract slightly in 2012 but recover in 2013 if the eurozone crisis stabilizes and the franc weakens.
The global economy is projected to improve but growth remains moderate, earning it a "B-" grade. Monetary easing, reduced fiscal drag, and lower oil prices support the projected pickup. However, stronger investment is needed to boost demand, potential growth, technology diffusion, and employment. Coordinated monetary, fiscal and structural policies are required to achieve strong, inclusive, sustainable "A" growth.
1) The document examines how pro-growth policies impact economic stability for households.
2) It finds that some reforms like weakening unemployment benefits or tax progressivity can increase household instability, while bolder reforms replacing tight labor and product market regulations can boost growth without harming stability.
3) Tax and benefit systems also significantly impact whether individual earnings losses are attenuated at the household level, with countries having more generous, progressive systems providing greater stability.
The document discusses OECD forecasts during and after the financial crisis. It finds that:
1) Forecasts significantly overestimated growth during the crisis and recovery, missing the severity of the downturn.
2) Forecast errors were largest in vulnerable Eurozone countries and those with lower bank capital and more open economies.
3) The intensification of the Eurozone crisis was a major source of growth forecast errors.
4) Lessons from forecast errors highlight the need to better account for financial factors, global linkages, risks, and avoid "groupthink".
Know how China's Economic Slowdown has a significant impact on key economies that have strong trade ties with the country? Download the Aranca special report on China Slowdown here.
The document is a 2014 economic survey of India by the OECD that makes several recommendations:
1. India's economy is recovering but more reforms are needed to sustain growth above 8%, including reducing subsidies, increasing infrastructure investment, and tax reform.
2. Structural barriers have hampered growth and job creation, especially in manufacturing, and parts of the banking system are vulnerable.
3. Increasing opportunities for women could boost growth by over 2% by raising equity and the number of quality jobs.
4. Public health care is poor for most Indians and increased spending is recommended.
Euro area-european-union-enhancing-european-cooperation-oecd-economic-survey-...OECD, Economics Department
The 2016 OECD Economic Survey of the European Union and Euro Area finds that while macroeconomic policies have become more supportive, demand remains weak and unemployment is very high. It recommends that countries with fiscal space boost growth through budget support, and that monetary policy stay accommodative. It also suggests speeding up the resolution of non-performing loans, promoting non-bank financing, increasing public investment, reducing regulatory burdens, and enhancing labor mobility through increased recognition of qualifications and portability of pensions. Structural reforms across these areas could significantly increase EU GDP.
The OECD interim global economic assessment provides the following key points:
- Global growth prospects have improved slightly compared to previous forecasts due to stronger data, lower oil prices, and monetary easing.
- However, risks remain from inconsistent inflation and interest rates, rapid moves in asset prices, and lagging investment and employment.
- Policymakers need balanced policy packages including stable fiscal policies, reinvigorated structural reforms, and reduced reliance on monetary policy.
Baltic economies: more pain in the past, more gain in the future?Latvijas Banka
Presentation by Dr. Raul Eamets, Professor of Macroeconomics, Head of the Institute of Economics, University of Tartu (Estonia) at the Bank of Latvia conference "Economic Adjustment under Sovereign Debt Crisis: Can Experience of the Baltics Be Applied to Others?"
Riga, November 2, 2012.
The Swedish Economy No.2 - March 29, 2012 Swedbank
The Swedish economy contracted significantly in the fourth quarter of 2011 due to declining external demand, but signs of improvement emerged in early 2012. While GDP growth for 2010 was revised upward, growth in 2011 was weaker than previously reported. Lower productivity growth and household savings than estimated earlier pose challenges for economic analysis and policymaking.
Swedbank's Third Quarter 2011 Results PresentationSwedbank
Swedbank's third quarter 2011 results showed:
1) Net profit of SEK 3.475 billion and a core Tier 1 capital ratio of 15.1%, despite increased macroeconomic uncertainty.
2) Retail banking saw a solid performance with improved net interest income, stable asset quality, good cost control, and high interest rate sensitivity.
3) The group results demonstrated solid core development, with lower fees offset by good cost control and deposit growth, despite negative treasury valuation effects.
4) Liquidity and funding remained strong, with SEK 60 billion in long-term debt issued in Q3 covering USD funding needs for over 12 months.
Swedbank aims to be accessible, welcoming, and have an ongoing dialogue with customers. It strives to make banking easy through various digital and in-person services.
Purchasing Managers' Index Services January 2012Swedbank
Purhasing MAnagers' Index (PMI) is one of Sweden's fastest and most reliable leading economic indicator and it is produced monthly by Swedbank's Economic Research Department and SILF - an purchasing and logistics organisation. The PMI is produced both for the manufacturing industry and for the services sector.
Energy & Commodities, No. 1 - January 19, 2012 Swedbank
Commodity prices continued to trend lower in December 2011. Swedbank's Total Commodity Price Index fell by 1.4% for the month, driven by a 1.3% drop in crude oil prices. Food prices saw the largest monthly decline, falling for the fourth consecutive month as higher production has increased inventories. However, commodity prices remain volatile and uncertain global economic conditions could lead to further declines in 2012 depending on developments in the Eurozone crisis and growth in emerging economies such as China.
Swedbank reported 2011 results including a net profit of SEK 11.7 billion and a core Tier 1 capital ratio of 15.7%. Looking forward, Swedbank expects challenges from the new regulatory environment, lower economic growth in Europe, and decreased ability to reach return targets. Priorities include improving operational efficiency through cost reductions and focusing on risk management, particularly reviewing risk weights on mortgage and corporate loans.
Purchasing Managers' Index Services - September 5, 2012Swedbank
The Services PMI dropped from 54.8 in July to 50.8 in August, moderating the rise seen in July. All component indices declined except supplier delivery times. The employment index dropped significantly to 44.1, indicating weaker staffing needs among service companies. Despite the decline, indices except employment remained above 50, in the growth zone. Service companies remain cautiously optimistic about continued economic growth as the planned business activity index rose slightly.
The Global Economy No. 6 - September 11, 2012Swedbank
The document discusses developments in global monetary policy and the economic outlook. It notes that central banks, particularly the ECB and Federal Reserve, are expected to pursue more accommodative monetary policies to support growth. However, the effects on unemployment and real economic growth are expected to be small. More should be done through fiscal reforms and "unconventional fiscal policy" to boost growth. The ECB has launched a new bond-buying program called OMT, but its impact depends on reforms in crisis-hit countries and there are risks to the ECB's independence.
- Economic growth in Estonia reached 8.5% year-over-year in the third quarter of 2011, driven primarily by a strong manufacturing sector and private consumption growth.
- While manufacturing contribution is declining due to high bases of comparison, other sectors such as construction and services are contributing more to overall growth.
- Exports grew 24.2% in the third quarter but imports increased even faster, turning the trade balance negative for the first time in four years.
- The economic growth rate is expected to slow in the fourth quarter due to high comparisons and the ongoing eurozone crisis, with private consumption and investments continuing to support the economy.
According to a report by Swedbank's Economic Research Department:
- Estonia's GDP growth slowed to 4.5% in the fourth quarter of 2011, down from 8.5% in the previous quarter, due to a decline in export growth.
- While domestic demand continued strengthening in the fourth quarter, contributing 7.7% to overall growth, net exports were negative for the second consecutive quarter as import growth exceeded export growth.
- The report forecasts Estonia's economic growth will slow to 2.7% in 2012, supported by domestic demand, with investment growth driven by public sector projects and private sector investment expected to increase more in 2013.
Economic growth in Estonia slowed slightly in the first quarter of 2011 to 3.9% from 4.5% in the previous quarter. The construction sector contributed strongly to growth, supported by public sector building projects, while retail growth also remained strong. However, manufacturing output declined due to weaker external demand, negatively impacting overall growth. While domestic demand is recovering, export growth is slowing faster than import growth. The economic outlook expects strengthening domestic demand and stabilization in manufacturing to support overall growth of 2.7% for the year, though electronics exports will continue dominating.
1) According to preliminary estimates, Estonia's GDP growth slowed from 3.6% in the first quarter to 2% in the second quarter, with seasonally adjusted quarterly growth at 0.4%.
2) Domestically oriented sectors like construction, ICT, and services contributed most to growth, while manufacturing contributed marginally due to falling export volumes as external demand weakened.
3) Weaker manufacturing results were seen in the electronics sector, where volumes fell 14% in the first half of the year, partially due to high base effects from the previous year, though other sectors like wood products and machinery saw growing production.
- Latvia's GDP grew 6.9% annually in Q1 2012, up slightly from the previous quarter's growth rate of 1%. This exceeded the initial estimate of 6.8% growth.
- Investments and exports increased substantially, driving overall growth, while household consumption and government spending also increased.
- The construction industry saw the strongest growth of 28.5%, followed by manufacturing at 16.5%, as public infrastructure and private facility investments increased.
- While Latvian growth is expected to slow due to weakening European economic activity, the better than expected Q1 GDP may lead analysts to revise the country's full-year growth forecast upward from the current estimate of 2.5%.
Flash comment: Estonia - September 8, 2011Swedbank
- GDP growth in Estonia reached 8.4% year-over-year and 1.7% quarter-over-quarter in the second quarter driven by strong exports and investments, particularly in the manufacturing sector.
- Exports grew 32% year-over-year while investments increased 15% due to companies raising production capacities and improving efficiency. Imports also increased 32% to support export growth.
- While household consumption grew 4%, savings rates may be weakening and unofficial incomes or consumption habits may be changing as durable goods consumption increased 34%.
- Additional key growth sectors included transport, construction, and tourism-related services, while real estate and financial activities declined.
- Second half growth is expected to be
Latvian GDP grew 5.6% year-over-year in the second quarter of 2011, driven mainly by strong growth in industry and exports. However, the analyst expects GDP growth to slow in the second half of the year due to weaker demand from Europe. While household consumption growth has been stable due to improving employment and wages, rising prices are limiting growth in purchasing power. The analyst maintains GDP growth forecasts for 2011 at 4.2% but acknowledges European economic slowdown will likely reduce Latvian export performance and investment activity in the coming quarters.
- Latvian GDP grew 5.5% in 2011, driven primarily by exports and investments which were up 9.1% and 25.6% respectively.
- In Q4 2011, GDP growth slowed to 1.1% from 1.5% in Q3, with investments and exports continuing to power the economy.
- While risks have declined, eurozone issues remain a challenge, leading economists to forecast slower GDP growth of 2% for Latvia in 2012 as export growth moderates.
- In the second quarter of 2012, Lithuania's GDP growth slowed to 2.1% year-over-year, below expectations, with quarterly growth of 0.4%.
- The slowdown was partly due to the closure of an oil refinery for maintenance, which makes up a quarter of Lithuanian industry. Business inventory contractions also weighed on growth.
- Outlook for Lithuania depends largely on developments in the euro zone, where recent events have not been encouraging but ECB actions are expected to relieve tensions and improve confidence. The bank maintains its GDP growth forecasts of 3.3% for 2012 and 4.3% for 2013.
Real wage growth in Estonia decelerated to 1.1% in the second quarter of 2012, down from 2.4% in the first quarter. Nominal wage growth slowed to 5% annually, while inflation remained higher than wage increases. Wages increased the most in construction, arts and entertainment, and accommodation and food services due to strong domestic demand and labor shortages. Manufacturing wages rose 4% as qualified labor became scarce. The economic research department expects average gross wages to increase 6.5% for the year, with real wage growth of 2.3%, though higher inflation could limit real wage growth.
Latvian GDP grew 0.3% quarter-over-quarter in the first quarter of 2011, driven mainly by investments in fixed capital which increased 28.4% year-over-year. While exports continued to grow at 14.7% year-over-year, import growth was even stronger at 20.7% resulting in negative net exports. Household consumption growth remained weak at 3.6% as purchasing power did not improve significantly. The economic forecast remains at 4% GDP growth for the year as investments and exports are expected to continue growing, though implementation of structural reforms could increase growth further.
Latvian GDP grew 0.3% quarter-over-quarter in the first quarter of 2011, driven mainly by investments in fixed capital which increased 28.4% year-over-year. While exports continued to grow at 14.7% year-over-year, import growth was even stronger at 20.7% resulting in negative net exports. Household consumption growth remained weak at 3.6% as purchasing power did not improve significantly due to low wage growth and high unemployment. The economic forecast remains at 4% GDP growth for 2011 with investments and exports expected to continue driving growth.
China's economy is slowing but remains strong compared to other economies. Growth is projected to be above 8% in
2012-2013, and inflation is decreasing. However, China is vulnerable to external shocks, particularly a severe recession
in Europe which could sharply reduce China's growth. The government should use fiscal policy, through the budget
rather than banks, to counter economic weakness from abroad. Rebalancing China's economy to rely less on
investment and more on private consumption is also important.
China's economy is slowing but remains strong compared to other economies. Growth is projected to be above 8% in
2012-2013, with inflation coming down. However, China is vulnerable to external shocks, particularly a severe recession
in Europe which could sharply reduce China's growth. The IMF recommends a modest fiscal stimulus through the budget
if external conditions deteriorate significantly. Over the medium term, China needs to continue rebalancing its economy
away from investment and exports toward private consumption.
The Lithuanian Economy - No 6, September 2, 2011Swedbank
The Lithuanian economy grew at a slower pace of 6.3% in the second quarter of 2011, driven by lower investments and completion of the inventory restocking process. Unemployment declined sharply to 15.6% in the second quarter but remains high, while industrial production growth also slowed. Retail trade growth slowed in July due to lower car sales, and confidence indicators declined slightly in August due to concerns about the global economic environment. Overall growth is expected to continue at a slower pace for the rest of 2011 as demand uncertainties remain.
The Lithuanian economy is showing signs of recovery, though investments remain weak. While corporate profits are growing, investments in fixed assets continue to decline sharply from their pre-crisis levels. However, some early signs of recovery in machinery and equipment investments emerged in the second quarter of 2010. Looking forward, improving business confidence and rising capacity utilization rates signal that investments will need to increase next year to maintain competitiveness, facilitated by retained earnings as credit availability remains constrained. The government also plans deep cuts to investment spending in 2011, shifting the burden to the private sector.
According to a flash estimate by Latvia's Central Statistical Bureau, GDP in Latvia increased by 1% in Q2 2012 compared to the previous quarter. This maintained the pace of growth from the prior two quarters. However, annual GDP growth slowed to 5.1% in Q2 from 6.9% in Q1, though it remained the highest in the EU. Growth was supported by both exports and domestic demand, though investment growth is expected to have slowed as industry expansion moderated. Retail trade rebounded and industry showed 7% annual growth in Q2. Economic sentiment remained robust, also supporting growth. GDP growth is forecast to decelerate in the second half of 2012 due to smaller base effects and negative calendar effects.
A2 & AS Economics: UK Economy Revision Briefingtutor2u
The UK economy suffered a deep recession from 2008-2009 and recovery has been slow and fragile with growth below 1% in most years since. Weak private sector demand from falling real incomes and low business investment have held back growth. Export growth has also slowed in recent years. The government has pursued fiscal austerity measures and spending cuts to reduce large budget deficits, further weighing on growth. Restoring stronger growth and rebalancing the economy away from debt-fuelled consumption toward exports and investment will require boosting productivity, business investment, and improving the supply of credit. Potential growth rates are estimated to have declined significantly in recent years due to factors like low R&D spending and business investment.
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Flash comment: Estonia - August 14, 2012
1. The Estonian Economy
Monthly newsletter from Swedbank’s Economic Research Department
by Teele Reivik No. 3 • 14 August 2012
Investments are likely to continue growing, but at a
slower pace
Enterprise investments grew rapidly in 2011 fuelled by recovering foreign
demand and rising exports. The largest amounts of investments were made by
the manufacturing and energy sectors. By the first quarter of 2012, the growth
had slowed in manufacturing but risen strongly in energy sector. The increase
in enterprise investments has not been dependent on loan money; companies
are using more of their own funds.
Public sector investments are planned 28% larger this year – funds for
increase will mostly come from EU funds and the revenues from sales of CO2
quotas.
The number of transactions and the prices of residential real estate have been
growing steadily for the past two years. The increase in prices is caused
mainly by the rising costs of materials and labour, as well as by the growth in
demand. Although home loan interest rates are at a record low it seems that
people are using more of their own funds now than in recent years.
Investment share in and contribution to GDP confidence, increased foreign demand and also the
(in real terms)
postponed investments, which were delayed during
15% 45% the crises and then finally made. Although growing,
40% investment share in last year’s GDP was below the
10%
historical1 level and based on that there is a reason
35%
5%
to expect a continuing growth in investments.
30%
0%
Enterprise investments made a strong
25%
2006 2007 2008 2009 2010 2011 2012
comeback in 2011
-5% 20%
After hitting the bottom in the beginning of 2010, the
15%
-10% enterprise investments had made a strong
10% comeback by the end of last year, growing an
-15%
5% average 55%. The rapid increase could be
-20% 0%
explained by recovering foreign demand, which
boosted exports and production and, therefore, laid
GDP annual growth
Contribution to GDP growth a perfect foundation for increasing investment
Share in GDP (rs)
Source: SE volumes. In the first quarter of 2012, however, the
number grew only by 1% in annual comparison.
Investment volumes had made a decent recovery Behind the slowdown is the high base effect2,
by the end of last year after a rapid fall which
started in 2007. As a result of that recovery,
investments started to contribute to GDP growth
positively again (after nearly three years of staying
on the negative side) reaching the pre-crises level 1
10 year average share is almost 30%.
by the end of last year. Behind the grown volumes 2
In the first quarter of 2011, Estonian Air enlarged its
were, amongst other factors, the improved overall fleet which affected strongly the overall investments in
vehicles
Economic Research Department. Swedbank AB. SE-105 34 Stockholm. Phone +46-8-5859 1000.
E-mail: ek.sekr@swedbank.com www.swedbank.com
Legally responsible publisher: Cecilia Hermansson, +46-8-5859 7720.
Annika Paabut, +372 6 135 440. Elina Allikalt, +372 6 131 989. Teele Reivik, +372 6 137 925
2. The Estonian Economy
Monthly newsletter from Swedbank’s Economic Research Department, continued
Nr 3 • 14 August 2012
ongoing uncertainties about the euro area which building the Enefit 280 oil plant, co-generation plant
may be keeping companies from “putting it all out at the rapeseed processor Werol (both by Eesti
there” and also because larger investments could Energia), and the renewal of the distribution
be planned for later this year (investments tend to network (Elektrilevi OÜ). Investments should
be smaller during the first months of the year due to continue to grow in the energy sector as there are
weather conditions). many new and ongoing capital-intensive projects
planned for the near future- amongst others, the
Contributions to enterprise investments annual growth construction of Estlink 2, Harku-Lihula-Sindi high
80% voltage line (both by Elering) and the Auvere power
plant (by Eesti Energia)3.
60%
40% Enterprise investments
(EUR million)
20%
600 3,500
0%
500 3,000
2007 2008 2009 2010 2011 2012
-20%
2,500
-40% 400
-60% 2,000
300
buildings constructions
1,500
v ehichles computers
machinery and equipments land 200
Total 1,000
Source: SE
100 500
The largest investments in 2011 were made in the
0 -
manufacturing and energy sectors, almost 20% and
2007 2008 2009 2010 2011
19% of all enterprise investments. In the
Source: SE Manuf acturing Energy Total (rs)
manufacturing sector roughly three-fourths of
investments were made in equipment and
machinery. Behind these numbers were the Industry confidence
improved economic environments of Estonia’s main 40
trade partners. The resulting increase in foreign
demand caused production volumes to continue 30
growing even more (the growth started in 2010) in 20
the beginning of last year and induced companies
to invest to avoid capacity constraints. Production 10
volumes grew the most in machinery and
0
equipment, which also was the largest export
2006 2007 2008 2009 2010 2011 2012
article. The growth of machinery and equipment -10
slowed at the end of the year and remained low in
-20
the beginning of 2012 due to the decreased
(foreign) demand, grown uncertainty and high base. -30
As of July present year the industry’s confidence
indicator reflects that in the annual comparison the -40
Industry conf idence
expectations on export and production volume have Export expectations
lowered somewhat and so has the general Source: DG ECFIN Production expectations
confidence regarding the sector. Considering the
decreased demand and the sector’s hesitant Although enterprise investments have been growing
attitude about the near-term prospects it may be again since the beginning of last year, this growth
likely that the enterprise investments growth will has not been based on loans. In the boom years
remain slow for a while. the total corporate loan stock peaked at the level of
In the energy sector, investments grew by nearly
55% last year and by 120% in the first quarter of
2012 in annual comparison. This was due to
several large development projects, with many new
ones starting or already started this year- e.g., 3
See also www.energia.ee and www.elering.ee
2 (4)
3. The Estonian Economy
Monthly newsletter from Swedbank’s Economic Research Department, continued
Nr 3 • 14 August 2012
EUR 7.6 billion and by mid-2012 the amount had 2010. Since then investments have shown a
fallen to EUR 6 billion. Loan volumes have been growing trend throughout the last year and also in
decreasing steadily since the beginning of 2009, the first quarter of present year. According to the
and loan turnovers have remained modest. One of state budget of 2012 the investments are planned
the main reasons is that banks and companies are to be 28% larger than in the previous year (in
more cautious: requirements for getting a loan are nominal terms). The funds for the increased
stricter and many enterprises do not qualify. But investments will mostly come at the expense of the
investments have been growing (+54% in 2011) local governments and the selling of CO2 quotas,4
while the loan stock has been declining (-8.5% in as well as from EU funds. The largest amounts are
2011) and it may be so because enterprises prefer expected to go to the areas of government of
to use their own finances for making them (which Ministry of Economic Affairs and Communication
has been possible due to grown turnovers and (mostly for the renewal of highways:
profits) or might depend on foreign investments EUR 71 million), the Ministry of Agriculture and the
(e.g. in terms of foreign-owned firms). Nearly 50% Ministry of the Environment (renewal of the water
of all foreign investments in Estonia are direct and waste management infrastructures).
investments (FDI) and last year, the largest
Looking forward, the government recently approved
amounts of FDI came from Finland and Netherlands
a substantial real estate investment plan (2013-
and were made in the manufacturing, real estate,
2016), according to which (amongst many other
and wholesale and retail sectors. In annual
objects) the construction of the Estonian National
comparison the FDI decreased 70% in the first
Museum, Tallinn Prison and the European IT
quarter of 2012. Behind that fall might again be
agency building will be supported. Nevertheless, it
previously mentioned concerns over the euro area
is likely for public sector investments to decrease
which made foreign investors to pull back and wait
for the next few years due to the end of the CO2
for things to clear up. Despite the overall decrease
projects and EU programming period (2007-2013).
which affected also the real estate and wholesale
The next programming period starts in 2014.
and trade sectors, FDI in the manufacturing sector
grew. Behind that growth were new and ongoing Residential real estate sector on its way to
construction projects for new plants or expansions a full recovery
of existing ones (e.g. ABB, Incap Estonia, Lappset
OY). The further growth or decline of FDI depends The growth of notarised purchased-sale
5
mostly on the economic developments in the other transactions of real estate has been rather stable
EU countries (mainly Sweden and Finland) where in the past two years and has reached about the
roughly 90% of FDI to Estonia are coming. same level as in 2002-2003. In annual comparison
the number of transactions had increased 22% by
Enterprise investments and loan stock the first quarter of 2012. Behind this rise might be
(EUR millions) the people’s growing confidence in their financial
situation: wages have been increasing and there
1,000 8,000
are more jobs available (which results in the
900 increase of household disposable incomes). Prices
7,500
in residential real estate have also been increasing:
800 according to the Estonian Land Board data, the
7,000
price index of apartments sold as dwellings grew
700 almost 12% in the second quarter of 2012 in annual
6,500
basis. This may be explained by the rising prices of
600
materials and labour, increasing demand and also
6,000
500 changes in the quality of real estate sold.
5,500 Although home loan interest rates are at a record
400
low, the loan volumes have been decreasing and
300 5,000 turnovers have remained modest. Considering that
2007 2008 2009 2010 2011 2012
Source: SE, BoE Enterprise inv estments Loan stock (rs)
Public sector investments to grow 28% 4
Synopsis of the state budget 2012
The public sector cut back its investments during http://www.fin.ee/riigieelarve-2012 „Lühiülevaade 2012
aasta riigieelarvest”
the crises years- they fell 35%, from 5
In this case registered immovables with residential
EUR 825 million in 2008 to EUR 557 million in buildings and apartments
3 (4)
4. The Estonian Economy
Monthly newsletter from Swedbank’s Economic Research Department, continued
Nr 3 • 14 August 2012
the trend for residential real estate transactions is This is expected to happen in 2013-2014 depending
moving up we may find an indication that a large on how and when the euro area debt crises will be
number of those transactions might be financed solved. Public sector investments are likely be more
with peoples’ own funds. modest next year due to the end of the CO2
projects and decreasing EU funds. Residential
Positive outlook despite the slower growth investments are anticipated to continue a steady
rate growth if wages keep rising, the employment keeps
Even though the investment growth rate is slowing, increasing and consumer confidence growing.
our outlook remains positive: in April Swedbank Although there is a high probability of loans
Economic Outlook we anticipated investments to becoming more expensive in the near future, if their
grow over 10% next year (our new SEO will be turnovers were to increase, there is room for even
released at the end of this month). Enterprise further growth.
investments are likely to increase more when the
ongoing uncertainties surrounding the euro area
start to dissolve and companies feel more secure.
Swedbank
Economic Research Department Swedbank’s monthly newsletter The Estonian Economy is published as a service to our
SE-105 34 Stockholm customers. We believe that we have used reliable sources and methods in the preparation
Phone +46-8-5859 1028 of the analyses reported in this publication. However, we cannot guarantee the accuracy or
ek.sekr@swedbank.com completeness of the report and cannot be held responsible for any error or omission in the
www.swedbank.com underlying material or its use. Readers are encouraged to base any (investment) decisions
on other material as well. Neither Swedbank nor its employees may be held responsible for
Legally responsible publisher
losses or damages, direct or indirect, owing to any errors or omissions in Swedbank’s
Cecilia Hermansson, +46-8-5859 7720
monthly newsletter The Estonian Economy.
Annika Paabut +372 6 135 440
Elina Allikalt +372 6 131 989
Teele Reivik +372 6 137 925
4 (4)