Palts: Estonian economy holding up nicely24.08.2012, 15:37
Businessman and former finance minister Tõnis Palts says that, in comparison with the rest of Europe, Estonian economy is still doing very well.
“We must keep our breath and pray that it remains so,” Palts told Äripäev, adding that although Estonia was sensitive to external shocks, especially from the Eurozone, there are signs that some major export partners such as Sweden also continue to do well.
While most of Europe is slowing down as well, with the German economy growing only 0.3 percent, a welcome boost to Estonia’s economy came from Sweden which reported a 1.4 percent growth in the second quarter.
Palts said that much is depending also on how the Finnish economy is doing.
“Estonia has relatively small unemployment, but it owes a lot to Finland. We must keep our hopes high that the economies of Finland, Sweden and Germany remain strong”.
Speaking of Finland, Palts agreed that Finnish economic slowdown would dampen Estonia’s economic growth.
“When things go bad in Finland, it would affect Estonia first through the export market and secondly through employment. When unemployment in Finland were to start growing, it would directly influence the use of immigrant labour force.”
There were already some worrying signs when it was reported that the Finnish economic growth in the second quarter fell one percent from the first quarter and 0.3 percent in comparison in annual terms.
Although in the second quarter the Estonian economy itself expanded 0.4 percent quarter on quarter, this was also a sign of slowdown, triggered mainly by problems in the export of electronics industry.
Palts says that one important indicator of how well the Estonian economy is doing is the sale of new cars that reacts very quickly to changes in consumer confidence.
Although new cars sales in the first half are not at the level of 2005 and a far cry from the peak of 2007, in seven months, new car sales increased to 10,449 units from 8,676.
Moreover, inflation in July had fallen to 3.6 percent year on year which is the lowest level in two years.
As for unemployment, it is now at the lowest of four years, at 10.2 percent down from 13.3 percent a year earlier. While there were 92,100 people unemployed in the second quarter 2011, there are now 71,000 unemployed.
Unemployment figures quoted above are based on the Labour Force Survey in which Statistics Estonia measures the share of unemployed from the total workforce and not on the number of registered unemployed that can be more easily manipulated.
As for budget revenues, the state collected 59 percent of the target in seven months. In cash terms, the amount is even higher than a year ago. Also tax intake has improved from last year.