Pērn Baltijas valstis bija vienas no visstraujāk augošajām ekonomikām Eiropas Savienībā. Šogad Latvija un Lietuva joprojām turpināja uzrādīt būtisku izaugsmi, savukārt Igaunijas ekonomikas izaugsme apstājās pirmajā pusē 2013.

1. Baltic Household
Outlook
October 2013

2. Household income
Edmunds Rudzitis
SEB Latvia

3. Labour market improvements continue
Unemployment (job-seekers*) rate, (%)
Latvia
Lithuania
Average gross wages and salaries
(%, YoY)
Estonia
Latvia
Lithuania
Estonia
21
10%
18
8%
15
6%
12
9
4%
6
2%
3
0%
* Persons aged 15-74
Source: National Statistics
Source: National Statistics
•
Unemployment is at the lowest level since 2008 and well below the peak level
•
In Estonia the unemployment rate has decreased to 8.1 per cent, while in other Baltic countries the
unemployment rate is still above the 10 per cent level.
2013-10-23
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4. Workers’ purchasing power is improving…
Real wages (%, YoY)
Average net wages (in euros)
Latvia
Latvia
Lithuania
Estonia
Lithuania
Estonia
6%
900
778
800
4%
716
686
700
2%
660
600
500
0%
450
464
470 475
488 485
514 506
-2%
400
-4%
300
2Q10
2Q11
2Q12
2Q13
Source: National Statistics
•
Source: National Statistics
In the first half of 2013 real wage growth was positive in all Baltic countries due to wage growth
and lower inflation
2013-10-23
4

5. … but real income are still below the pre-crises level
Dynamics of real wage (1Q2005=100)
Latvia
Lithuania
Estonia
170
160
150
140
130
120
110
100
Source: National Statistics, SEB calculations
•
Compared to 2008, the average real wage is approximately 13 per cent lower in Lithuania, 8 per
cent lower in Latvia. In Estonia the real wage is below the pre-crisis level by approximately 3 per
cent.
2013-10-23
5

6. Household consumption
and liabilities
Triin Messimas
SEB Estonia

7. Household consumption and GDP
Consumption in GDP, Estonia
Consumption of household sector
share of GDP (%)
Estonia
Latvia
Y-o-Y Change (real values)
Contribution to GDP growth (%)
Lithuania
10
80
5
70
0
-5
60
-10
50
-15
-20
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2009
Source: Eurostat
2010
2011
2012
2013
Source: Statistics Estonia
•
In Lithuania the share of household consumption is the highest at 65%, in Latvia at 63% and in
Estonia at the lowest 51%. The EU average is 55%
•
However, the contribution of household consumption to GDP growth has increased as the other
components (export) is modest.
2013-10-23
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8. Household consumption developments
Retail trade (deflated turnover)
y-o-y change, %
Consumption of household sector
(y-o-y real change, %)
Estonia
Latvia
Estonia
Lithuania
Lithuania
Latvia
EU27
20
40
30
15
20
10
10
5
0
0
-10
-5
-20
-10
-30
Source: Eurostat
Source: Eurostat
•
The real consumption growth of households has remained in the lower level compared to the
pre-boom period, namely at 4%-6%
•
The growth levels in the Baltics are on higher levels than EU average which has been negative
since the beginning of 2012
2013-10-23
8

9. Plans for major purchases
Major purchases at present
August 2012
Major purchases next 12 months
August 2012
August 2013
15
August 2013
0
9.8
10
6.8
-5
5
-10
0
-15
-5
-20
-5.5
-10
-8.4
-13.6
-25
-15
-24.0
-30
-14.7
-16.7
-20
-25
-10.3
-35
-40
-24.1
-30
-38.1
-39.6
-45
Estonia
Latvia
Lithuania
Source: Eurostat
Estonia
Latvia
Lithuania
Source: Eurostat
•
Lithuanians are most optimistic in their assessment about conducting major purchases at present
and in the future.
•
Compared to the assessments a year ago, Latvians have improved their assessment about major
purchases now but they are more pessimistic about major purchases in the coming year.
2013-10-23
9

10. Share of compulsory expenses
Share of housing costs from total
consumption (%)
Share of food consumption (%)
2004
2007
30
2009
2012
2004
28
2007
26
20
25
23
20
19
19
17
18
2012
30
25 25 25
25
2009
19 19
20
15
13 13 13 13
20 19
21
21 22
15
14
5
0
16 16
10
5
21 22
20
15
10
24 24
23
0
Estonia
Latvia
Lithuania
EU27
Estonia
Latvia
Lithuania
EU27
Source: Eurostat
•
The share of food consumption is in the Baltic states higher than is the EU average; it is the
highest in Lithuania
•
The share of compulsory expenses has increased in 2012 compared to 2007 most in Estonia (by
3pp) and slightly less in Latvia and Lithuania (by 2 pp)
2013-10-23
10

11. Changes in household liabilities
Changes in housing loan portfolio, Y-o-Y
Estonia
Latvia
Indexed volume of new housing loans, 2011Q1=100
Estonia
Lithuania
Latvia
Lithuania
250
2%
0%
200
-2%
150
-4%
100
-6%
-8%
50
-10%
0
-12%
Source: National Central Banks
Source: National Central Banks
•
The downward trend on the housing credit market is halting in Estonia and Lithuania which show
positive movements. The housing loan volume +0.14% in Estonia
•
The deleveraging continues in Latvia, the housing loan volume -4.7%. Although the new loan
volumes are highest in Latvia, it does not outweigh the write-offs and repayments of the housing
loans.
2013-10-23
11

12. Consumer loan and other borrowing
Changes in consumer credit and other lending
portfolio, Y-o-Y
Estonia
Latvia
Indexed volume of new consumer credit and other
borrowing, 2011Q1=100
Estonia
Lithuania
Latvia
Lithuania
200
0%
-5%
150
-10%
100
-15%
50
-20%
0
-25%
Source: National Central Banks
Source: National Central Banks
•
Consumer loan and other borrowing continues the downward trend: -20.6% in Latvia, -8.6% in
Estonia and -5.7% in Lithuania
•
There are no signs for increasing volumes of new consumer loans in Lithuania, while in Estonia
and Latvia show increase of 13-14%
•
Consumers use alternative financing methods (hire purchases)
2013-10-23
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13. Savings and investments
Julita Varanauskienė
SEB Lithuania

14. Household puzzle in the environment of the low interest rates
TO CONSUME?
REASONING
• To avert the risk of economic depression
TO SAVE?
• To offset excessive increase in borrowing costs
SIDE EFFECTS
• Depressed returns of safe assets
TO BORROW?
• To counter deflationary pressures
• Boosted asset prices
TO INVEST?
2013-10-23
14

15. Assets larger than liabilities in Estonia and Latvia – for the first
time
Latvia
Estonia
Financial assets (mEUR)
Liabilities (loans, mEUR)
Financial assets (mEUR)
Lithuania
Liabilities (loans, mEUR)
Financial assets (mEUR)
9000
12000
12000
7500
10000
10000
8000
8000
6000
6000
4000
4000
2000
Liabilities (loans, mEUR)
2000
6000
4500
3000
1500
0
0
0
2008
2008
2009
2010
2011
2012
IIQ 2013
2009
2010
2011
2012
IIQ
2013
2008
2009
2010
2011
2012
IIQ
2013
Source SEB estimates
• Increase in financial assets of households to a large extent depends on growing income of households and favourable
environment prevailing in the securities markets.
• Estonians – most persistent to accumulate financial assets
• Different pace of increase in financial assets was the result of each country-specific factors: - higher perceived
necessity to save money in Estonia,
-finally improving expectations, which decreased the need of savings for a rainy-day in Lithuania.
-euro introduction expectations in Latvia
15

16. Latvians’ “saving image” shaped by cash-to-deposits flows
Household deposit dynamics in 2013
(y-o-y)
Estonia
Latvia
Households' cash to deposits ratio
Estonia
Lithuania
10%
35%
Lithuania
40%
9%
Latvia
8%
Upcoming Euro
introduction
30%
7%
25%
6%
20%
5%
4%
15%
3%
10%
2%
5%
1%
0%
0%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Source: Central banks
Source: Central banks
• Households bring their cash holdings to ensure a smoother currency exchange process
• The situation once observed in Estonia repeats itself in Latvia
• It is doubtful if lower cash-to-deposits ratio persists
2013-10-23
16

17. Investments into real estate become more and more attractive
as an alternative form of asset accumulation
Indicator of housing price expectations
Index of real estate (houses and
appartments) purchase contracts
(average 1Q2011 = 100)
Estonia*
Latvia
Lithuania
Latvia
Lithuania
50
45
40
35
30
25
20
15
10
5
0
180
170
160
150
140
130
120
110
100
2011
2012
2013
* all real estate, not limited w ith houses and appartments
Source: Statistics Estonia, Latio, Oberhaus, SEB estimates
Mar Jun Sep Dec Mar Jun Sep
2012 2012 2012 2012 2013 2013 2013
Source SEB
• Real estate market is getting more and more active
• Expectations of households related to the real estate prices in future are improving
• However, a significant amount of such investment and much higher requirements related to quality of the real
estate does not allow everyone who has such intentions to accumulate savings in such form
2013-10-23
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18. Low interest rates – not the only criteria for household
financial decisions
The strongest positive trend of consumption is observed in Lithuania.
The situation in Latvia is most undetermined.
No major changes related to consumption are expected in Estonia.
TO CONSUME?
TO SAVE?
TO BORROW?
National factors determine higher
perceived necessity to save money
in Estonia. Savings accumulation in
Latvia is pushed by approaching
euro
introduction.
Improving
situation and expectations in
Lithuania decrease the need to
accumulate new savings.
Households are still very cautious to
finance their consumption needs
through borrowing. The volume of
mortgage borrowings of Estonian
households will continue to grow .
Lithuanians will follow more gradual
revival. Latvia has not reached the
bottom of the housing volumes yet.
TO INVEST?
Interest for alternative saving and investment options will remain rather high. Whereas the overall
saving levels, financial literacy and awareness about more complex financial products and
affordability of investments into real estate remains low, the traditional saving forms will prevail.
2013-10-23
18

19. What to expect in household
finances?
Edmunds Rudzitis
SEB Latvia

20. More money in households’ pockets
WAGES
INFLATION
LV
5.5%
LV
2.8%
LT
4.5%
LT
2.8%
EE
6%
EE
2.7%
•
The increase in households’ purchasing power is expected to continue as income growth will
outpace the increase in consumer prices
2013-10-23
20

21. Income and taxation
Increase in net salary starting January 2014 (EUR)
2 dependants
1 dependant
Without dependants
Gross wage (LVL)
1000
500
350
0
5
10
15
20
25
30
35
Source: SEB calculations
•
Families with children and low-income employees could benefit the most from the planned
decrease in the tax burden on labour
2013-10-23
21

22. Baltic Household
Outlook
Questions?