At the beginning of last year everyone was waiting for a turning point, for the bad year 2022 to be behind us, for companies to put their renewed supply chains back into operation, for the economy to grow again, for inflation to disappear and for the energy prices are more reasonable. Reality turned out to be more like a dance of death: not all the news was bad, but with sufficient regularity there was bad or very bad news about the state of our economy.
“Usually you can’t provoke a crisis with an unpleasant component or problem, so there must be little more than one anyway. And at this moment they simply gathered here in our territory. /…/ East-West The transit was a considerable branch of the economy, does not exist and will not exist. Tourism had its own things that do not exist and will not exist in subsequent years, and so on,” said Toomas Luman, head of the Chamber of Commerce and Industry, principal owner of Nordecon.
If last year our economy contracted by 1%, in the third quarter of this year our economy was 3.9% smaller than last year. In other words, our economy has contracted for seven consecutive quarters, we are in an economic crisis.
“After all, our exports are declining. Our manufacturing industry is no longer competitive in many markets, and one of the reasons this is so is that the entire increase in energy prices has been completely absorbed by industry inputs, and this was often not the case in competing countries. /… / You understand that if you have energy, which is one of the main inputs in production, is twice and more times more expensive than in a competing country, then you simply don’t you can compete with them It’s not possible,” Luman explained.
Much of our concern is with our major trading partners. If it has been difficult anywhere in the world, it has also been difficult for the countries in our region. The economy is in decline or low growth in Finland, Sweden, Norway and Germany. In these countries there is less desire and less money to buy things that are produced here. Swedish and Norwegian krone exchange rates have also fallen, making our goods more expensive.
This year has been difficult for Estonia’s export processing industry. For Harmet, which produces modular wooden houses mainly for the Scandinavian markets, this has resulted, for example, in a drop in turnover of 50%. Maybe next year will be better.
“Let’s say that the entire Estonian manufacturing industry and wooden house manufacturers, including Harmet, are in a rather difficult situation today. However, we are working with different scenarios, different solutions, to find new opportunities. But the reorientation towards new markets it is definitely tied to a certain time to find new markets, get to know the markets, acquire new contacts, find solutions. Nobody, figuratively speaking, is waiting for you somewhere on the platform with tulips, you always have to find solutions in terms of new technical nuances “, explained Harmet CEO Alo Tamm.
In addition to the more complex situation in target markets, higher interest rates this year have begun to weigh on both businesses and households that have applied for loans. Euribor rose to 4%.
“For our companies this means additional costs or an increase in the interest burden, which is comparable to around 15% of their profits. Of course it is distributed very unevenly between business sectors, because the debt burden does not it is uniform, but for the private sector or the business sector as a whole it is a rather tolerable interest increase,” said Rasmus Kattai, head of economic forecasting and forecasting at Eesti Pank.
“And if you look at people, these additional interest expenses, which in total are in the order of 500 million, which have to be paid more than during the period when Euribor was at zero, represent comparatively about 2% of expenses for private consumption , annual expenses. , which a large part has to be paid additionally. It is just the nuance here that the debt burden is also distributed very unevenly among people. We have a third of families who have a mortgage for the house, the rest do not have a home loan. And those who have a home loan also have this, the size of the loan is very different and the weight of the interest is very different”, he added.
However, interest rate increases were not driven by an inhuman desire to simply make life difficult for people. The point was to combat rising prices in Europe. And at least so far successfully. Even in Estonia. At the end of the year the price increase fell to 4%. Significantly lower than the double digits of 2022.
“This is also the price increase that occurred at the end of last year and at the beginning of this year, with which the price level of the autumn months is compared. Currently, if you look at the cost of the consumption basket, “As it has over the past six months, since April, the consumer basket has not become more expensive: all its contents, all goods and services, as a whole, have remained essentially at the same price since the spring,” Kattai said .
Economic crises tend to differ from each other. For example, rapid wage growth continued. In the third quarter the average salary was 1,812 euros, or 10% more than the previous year. Unemployment growth was also not as rapid as feared, but in the third quarter it still increased by almost a third compared to the year, reaching the level of over 7%. However, it is possible that not all layoffs have occurred yet.
“In the manufacturing industry, I think yes. Probably the bottom has not yet been reached for everyone, and perhaps many have kept their jobs in the hope that there will still be a faster recovery. But the current signs that do not change show that there it will be a very rapid recovery,” Alo Tamm said.
And until the crisis is reversed, inequality in society will increase.
“Estonia is not special at all. In all crises, it tends to happen that capital owners and richer people get richer faster, but for poorer people it is difficult to cope. I don’t see this here, in Estonia state organization, there is no problem or mistake in this matter, but it is undeniable that the state must deal with it, because it cannot continue like this forever,” said Toomas Luman.
2023-12-30 17:32:00
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