In all three Baltic countries employment continued its upward trend, while the unemployment rate decreased. Over the last year, the unemployment rate in Estonia decreased by 2.1 percentage points to 9.3 per cent in the fourth quarter. In Latvia unemployment dropped by 1.2 percentage points to 13.8, while in Lithuania unemployment was 0.7 percentage points lower compared to the same period of 2011, reaching 13 per cent.
“The reason for the unemployment rate decrease is job creation and emigration. Job creation is expected to continue, albeit at a slower pace, and unemployment could decline at about the same rate as employment increases,” says Edmunds Rudzitis, Household economist at SEB in Latvia.
Wages expected to accelerate
SEB’s experts forecast that the rise in wages is expected to accelerate in 2013 in all the Baltic countries. Wage growth will be affected by the changes in the minimum monthly wage. In January 2013, the minimum monthly wage was increased to approximately 290 euros in Lithuania and to 320 euros in Estonia. In Latvia the minimum wage has stayed unchanged at approximately 285 euros. Latvia is expected to increase the minimum wage to 320 euros next year.
Financial assets continue to grow
Growth in households’ financial assets continued last year in all the three countries. Since 2008 households’ financial assets have increased by 1.25 billion euros in Latvia, and by 2 billion euros each in Lithuania and Estonia. The rise of financial assets in Latvia was mostly on account of the pillar II pension capital (mandatory savings), in Lithuania and Estonia mostly on account of deposits.
Julita Varanauskienė, Household economist at SEB in Lithuania:
“Although deposit interest rates have decreased to very low levels, households still accumulate savings in their deposit accounts. There are several reasons. Households did not accumulate sufficient reserves for extraordinary events yet, they are unwilling to invest in high-risk assets and they have yet to decide on how to use their funds.“
Loan stock of households is still declining
The total loan stock of households is still declining in all Baltic countries. In Estonia, the loan volumes have decreased by 10.5 per cent and in Latvia by 27.6 per cent since the peak in December 2008. In Lithuania loan volumes have dropped by 15.4 per cent since the peak in January 2009.
“The need for improvements in housing conditions is present in all three countries but the borrowing constraints are affected by income prospects,“ says Triin Messimas, Household economist at SEB in Estonia.