Estonian economy contracts sharply in first quarter

The Estonian economy contracted 15.1 percent year-on-year in the first quarter, with low domestic and foreign demand depressing overall output in the Baltic state, the statistics office said on Tuesday. Estonia, like its neighbours Latvia and Lithuania, has been hit by its worst post-Soviet recession because of the global credit crunch and the collapse of a real estate price boom. Their plight has hurt Nordic banks, many of which had expanded their loan portfolios and helped inflate prices and overheat the small open economies. Estonia s statistics office said the output drop in the first quarter, slightly less than a 15.6 percent flash estimate released last month, reflected a drop in activity in manufacturing, construction, retail and wholesale trade and transport, storage and communications. Domestic demand decreased by 21.4 percent compared to the first quarter of the previous year above all due to the substantial decrease in household final consumption expenditures, gross fixed capital formation and change in inventories, it said.

How would I rescue Estonia?

Crisis is the time for re-thinking and there are options available for Estonia, writes economist Hardo Aasmäe. Aasmäe writes in Eesti Ekspress that, shortly, the way out would be to create a state-owned commercial bank, savings and loan societies, increase income tax rate back to 26 percent and have every party bring into Estonia one billion kroons in investment projects. «This is not an ordinary crisis that usually repeat in every 10 or 12 years. This is a the most significant and complex crisis that we have seen so far. Therefore, we cannot simply do as we did last time since it would be the same as using cavalry to attack a tank division. We need to re-think things and must not be ashamed to do so. Getting smarter is not prohibited.

Banks lost half a billion in four months

Banks operating in Estonia made a combined loss of 505 million kroons in four months. Postimees writes that the data available for the first quarter shows that Swedbank lost 298 million kroons, SEB lost 40 million and Sampo 54 million kroons. The only large bank that made a profit was Nordea (95 million kroons). In comparison, in four months 2008 the banks made an aggregate 1.3 billion kroons in profit. According to analysts, most of these losses are still virtual, made up of loan provisions made by the banks. But even central bankers expect the situation to rapidly become worse. The banks ended last year with a combined net profit of 4 billion that was about half less than in 2007, but about 10 percent more than in 2006. Altough Estonian central bank Eesti Pank maintains that the banks operating in Estonia are well capitalised and can handle the loan losses, it admits that overdue loans as a share of total credit rose to 5.2

Opinion: Estonia enters the era of self-pity

Estonians have quickly discovered the feeling of self-pity, Tõnn Sarv writes in Eesti Ekspress. «Estonia is going from one extreme to the other. It was good to be proud, as the lyrics of a famous song said. Estonia was about to discover its Nokia and reach five richest countries. And then everything changed. Now we are one of the least attractive countries that have been deserted a long time ago by any sensible person. Well, yes, Both are issues of faith. I don t know whether a Slovak should feel less proud for being a Slovak. Or what countries or nations are even less attractive than Estonia. Every faith needs confirmation. Throughout the whole Soviet times it was believed that we were the most Western, most successful and the richest region in the red empire.

Estonian Railways to freeze wages, lay off over 150

Estonian state owned rail freight carrier Estonian Railways said that it has reached an agreement with the trade unions on freezing wages, writes Äripäev. The company said that although it previously estimated that the company could lay off 300 workers, the actual number would not be higher than 157 plus some managers. Speaking at Transestonia conference, board chairman Kaido Simmermann said that the company had laid off 25 percent of its workforce. He added that the new employment contract act would cause problems for the company since all employees would have to work 8-hour workdays. Also, the fees for nighttime work and work on weekends will go up. There are problems also with the rest time regulation. Today, a locomotive drivers drives 6 hours to Narva and rests there for 4 hours.

Estonia s budget deficit target very ambitious-IMF

The Estonian government is currently struggling to cut its budget for the second time this year to meet the target, but first quarter data now shows the economy contracted 15.6 percent while manufacturing shrank by over 20 percent on year. That which is on the table now is not enough to get to three percent of GDP, Christoph Rosenberg, head of IMF mission to Estonia said at a news conference. It is very, very ambitious, he added. Rosenberg added that the IMF s current forecast is for the Baltic economy to contract by 13 percent for 2009, and that 2010 would be more challenging for the country. The deficit in 2010 would be twice of this years deficit if no more measures are taken, the IMF mission head said. Talks on another 5.5

Kristina Norman

Kristina Norman belongs to the generation that entered the art scene in the 00s. She deals with political, provocative, documentary and research-based art. Norman s work is highly context-centred and has grown from her immediate surroundings. After-War is a comprehensive installation environment comprised of videos, photographs and objects in five separate spaces. The installation is based on a specific event and the issues surrounding it that must be regarded as the most traumatic event in Estonian society since the restoration of independence in 1991, and one which aroused the most public discussion. In April 2007, the Estonian government removed a monument commonly referred to as the Bronze Soldier from a prominent place in the centre of Tallinn, where it had stood since 1947. The memorial, officially called The Monument to the Liberators of Tallinn, was dedicated to the Red Army soldiers who fell during what in Russia is known as The Great Patriotic War (WWII), but for most Estonians this memorial was a symbol of Soviet occupation.

Economy expert: Estonia has no other way but deflation

Estonia is 20 pct more expensive than international competitiveness would allow and even modest inflation is harming economy s recovery, Heido Vitsur, an economy expert at Estonian Development Fund told Eesti Päevaleht. «Deflation is usually something that is terrifying. But Estonia has no other way than deflation is it doesn t want or can t devalue the EEK,» Vitsur said. «Estonia wasn t competitive even years ago and it s so even less with its expenditures and productivity. The level of expenditures can be taken down by devaluation or deflation in the short term. In longer perspective the productivity growth will also help, but it s not possible to count on it in the time of sharp crisis,» Vitsur said. He brought out three reasons why it s not possible to compare Estonia to other countries when talking of deflation.

April CPI drop puts Estonia close to deflation

The consumer price index rose 0.3 percent year-on-year in April after a rise of 2.0 percent in March. It fell 0.7 percent in the month in April after falling 0.5 percent in March. The median forecast in a Reuters survey was for annual inflation of 0.8 percent and a fall in the month of 0.3 percent. The last time year-on-year price growth was so slow was in June 2003, when it also rose 0.3 percent. In April compared to the previous month, the consumer price index was mainly influenced by the price decrease of food, especially of dairy and meat products, by a continuous price decrease of heat energy and by a price increase of motor fuel, the statistics office said in a statement. On a year-on-year basis, the consumer price index was mainly influenced by rising prices for alcoholic beverages and tobacco and by price falls for motor fuel and food.

Estonia is hiding their mistakes with budget cuts

Jüri Uustalu, an Estonian economic analyst based in US discusses of Estonian government s insane budget cuts in the commentary sent to Äripäev yesterday. Albert Einstein has said that insanity is doing the same thing over and over again and expecting different results.. The disastrous consequences of first budget cut are already visible and now the government is going to second round. Why? When the government made first cuts, the official economic forecast expected the economy to contract about 2 pct. After first cuts were made this number became 15 pct. And still the decision was to go on with mad budget cuts. What could be expected after second round of cuts or 20 pct to 25 pct «growth»? It all is needed as if euro? But in current situation who has promised that Estonia will join eurozone?