CEIC Data * Popular Articles o Will Russia’s Consumer Confidence Follow Stock Exchange Trend? o India’s New Balance of Payments for the First Quarter of Fiscal Year 2011-2012 o Brazil’s Automotive Sector Continues to Grow o Russia International Reserves Drop—Start of Negative Trend or Sound Regulatory Policy? o Russia’s Unemployment Rate Drops to 6.1% in August * Follow Us * Subscribe by RSS Subscribe by Email: Delivered by FeedBurner * Categories o Annoucements o Asia o Blog o BRIC o CEIC Data o Data Talk o Emerging Markets Direct o Europe o Latin America o Macro Watch o Middle East & Africa o News o News @lert o Uncategorized * Friends of ISI o BlogCatalog * More Emerging Markets o CEIC Data o Emerging Markets Public Company Profiles o FREE TRIAL OFFER o ISI Emerging Markets * Archives o November 2011 o October 2011 o September 2011 o August 2011 o July 2011 o June 2011 o May 2011 o April 2011 o March 2011 o February 2011 o January 2011 o December 2010 o November 2010 o October 2010 o March 2010 o December 2009 o November 2009 o September 2009 o June 2009 o May 2009 o March 2009 The Estonian Example—A Lesson for the Eurozone Posted by Europe CEIC Database Team November 2, 2011 Macro Watch: When the 2008 financial crisis hit Europe, Estonia was one of the worst affected by the real estate bubble burst. The country’s stable economic growth in the pre-crisis years was driven by growing credit expansion in the developing post-Soviet countries, but after the global crisis reduced the external financing, the growth turned to recession in the first quarter of 2008. The worst of the recession for Estonia was in 2009 when the GDP fell more than 17% on an annual basis and local businesses and households were hit hard by the recession. In 2009, the Industrial Production Index decreased by more than 20% compared to 2008 and the gross national income decreased by more than 16%. Development of GDP, Industrial Production Index and Unemployment Rate Estonia Eurozone Chart provided by: CEIC Data In response to the worsening economic and social conditions, the Estonian government made rapid structural reforms. Due to the successful application of its conservative fiscal policy, Estonia’s government managed to keep the budget balanced and achieved the lowest level of public debt in the EU – under 7% of GDP. Unlike the common reaction of the largest economies, Estonian government reduced public expenditures, which resulted in lower price indices covering the Maastricht inflation criteria, and the country adopted the euro in 2011. Of course, declining domestic demand also contributed to the low inflation. Due to its low debt levels, the monetary stability ensured by the currency board system, and improved business conditions, foreign direct investments in Estonia began to rapidly recover before the end of 2009, risk premiums and the interest rates levels in the country decreased, and Estonia’s GDP growth reached the highest level in the euro area – 8.4% in the second quarter of 2011. In August 2011, the S&P raised Estonia’s long-term rating to AA-. One of the biggest challenges for the Estonian government is to improve labour market conditions. With its successful anti-crisis program, the government reduced public expenditures, which in turn increased unemployment and reduced wages, mainly in the public sector. In 2008 the unemployment rate in Estonia was close to 4%, but over the following two years it grew, reaching almost 20% in the first quarter of 2010. In a lagged response, the unemployment growth turned negative in the second quarter of 2010, and by the second quarter of 2011, Estonia had the highest unemployment rate annual decrease in EU, dropping from 18.6% in Q2 2010 to 13.3% in Q2 2011. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Alexander Ivanov in Bulgaria – CEIC Analyst Digg This Reddit This Stumble Now! Buzz This Vote on DZone Share on Facebook Bookmark this on Delicious Kick It on DotNetKicks.com Shout it Share on LinkedIn Bookmark this on Technorati Post on Twitter Google Buzz (aka. Google Reader) CEIC Data, Europe, Macro Watch No Comments Will Russia’s Consumer Confidence Follow Stock Exchange Trend?

Russia Data Talk: The economic situation became unstable in September 2011 with the sudden fall of major Russian stock indices. The stock exchange index is usually the first to react to any change of economic sentiment on the market. Data published on consumer confidence usually follow the trend, although lag due to the methodology of the survey conducted once a quarter by the Federal Statistics Service. Some analysts forecast a second wave of recession, but government officials declare that there are no real reasons to worry about a major crisis and the current slump will not last long.

Consumer Sentiments and Index RTS

Chart provided by: CEIC Data

The positive recovery trend of the stock exchange market started in the beginning of 2009 with a low of 535 points in January 2009. The stock exchange index gradually increased to 2,044 points by March 2011. While the second quarter of 2011 was a time of uncertainty with some fluctuations of the stock market, and August–September data show a decline to a one-year low of 1,341 points in September 2011. Daily stock exchange data rebounded in October back to positive growth. Nevertheless, it is too early to draw a conclusion about a sustained recovery of the stock exchange market.
Consumer confidence and expectations surveys show similar dynamics throughout the past 10 years. From 1999 to 2008, consumer confidence grew steadily, from negative to some positive numbers in 2008, only to be followed by a huge slump during the 2008 recession, but the recovery in confidence strengthened again from March 2009 to September 2011. A sudden drop on the stock exchange market together with depreciation of the ruble in September added additional stress to consumer confidence negative expectations. Consumer confidence varies according to gender, age, and residence groups, usually with higher values in the cities, and the General Consumer Confidence Index depicts the average.
Stock exchange data show the immediate reaction of the market, which can be used for forecasting the near-term economic situation. Consumer confidence and expectations provide market sentiment from a consumer standpoint—as well as consumer desires to spend or save, which may be critical for the economic activity. These data provide a ground for forecasting economic growth and production in the near future.
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By A. Dembitski – CEIC Analyst