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Estonian report Estonian report
by Euro Reporter
2010-09-07 07:32:15
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Estonia Aims to Cut ‘Too High’ Energy Subsidies, Minister Says

Estonia’s government wants to reduce subsidies for renewable energy producers to cut costs for consumers, Economy Minister Juhan Parts said. The Economy Ministry will prepare a bill on amendments within a month, Parts said in a phone interview in Tallinn. “The order of magnitude” for the reductions will be 50 percent, while cuts may differ across energy sources. Proposals will be based on a study by the country’s Competition Board, due to be presented “soon,” Parts said.

“This is about what a reasonable level of return is and what the actual price of electricity is,” Parts said. “Our main goal is to avoid discrediting investment in renewable energy, which may be the result of too high profitability and too high subsidies granted by law.” Estonia’s parliament in 2007 raised subsidies to renewable energy producers by 42 percent to 115 senti (9.48 cents) per kilowatt hour of electricity for up to 12 years, with a purchase obligation of up to 200 gigawatt hours annually, while further support was established for sold electricity of as much as 400 gigawatt hours.

The cost of renewable energy for consumers, calculated each year based on expected subsidies, more than doubled this year to 0.81 euro cents per kilowatt hour plus VAT from a year earlier. “With this kind of infrastructure service, these kind of unreasonable support levels are at odds with the justified expectations of consumers,” Parts said.


Estonia Business Forecast Report Q1 2010 - new market analysis released

The core macroeconomic and political risk scenario for Estonia remains little changed, with the country expected to remain in recession through to 2010. Despite signs that Western Europe is likely to recover faster than originally expected, Estonia and its Baltic peers will not be in a position to take significant advantage of improved external conditions. With limited export sectors, the core underlying factor driving the economy will continue to be domestic deleveraging and the resulting sharp contraction in domestic demand.

The success of Estonian Prime Minister Andrus Ansip’s minority coalition government in passing further expenditure cuts within its 2009 budget bodes well for future political stability. Our core view is that broad political consensus towards accelerated euro adoption should provide an anchor for economic policy and help prevent any major parliamentary ructions through 2010. That said, with the government having the official backing of only a minority in parliament, we caution that risks of a serious political crisis remain. Indeed, we still do not rule out the possibility of early elections. While we hold to our core view that the recession in Estonia reached its trough in the second quarter, we see little scope for a recovery to gain pace in H209. Indeed, leading indicator data suggest that Estonia will continue to experience a double-digit contraction in Q309; and a return to positive growth is not expected until H210. We hold to our forecast for real GDP to decline by 13.2% in 2009 and by 1.2% in 2010. T he Estonian government gave formal approval to sell its 27% minority stake in telecoms company Eesti Telekom on September 24 2009. Swedish company Teliasonera will pay EEK93/share for the government’s holding and also receive an extraordinary dividend in 2009.


Estonia Budget Gap May Shrink More Than Planned on Tax Revenue

Estonia’s budget deficit may shrink more than forecast after tax receipts reached a record percentage of the government’s annual revenue plan last month, Prime Minister Andrus Ansip said.  Tax revenue was about 68 percent of the full-year forecast as of Aug. 29, “a level we have never had before at this time,” Ansip said at a news conference today in Tallinn, the capital. “Based on tax collection in August, we may exceed the annual tax plan.”

Estonia in July received approval from the European Union to adopt the euro next year. The Baltic nation will probably cut its budget deficit to 1.3 percent of gross domestic product this year from 1.7 percent in 2009, the Finance Ministry forecast last month. Among euro-zone members, only Finland and Luxembourg met the EU’s 3 percent limit last year.

Still, one-time deficit-reduction measures, including proceeds from the sale of spare United Nations carbon credits and savings from putting pension contributions on hold, will amount to 2.6 percent of GDP this year, the ministry said. That compares with 0.9 percent of GDP last year, the ministry said.

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