Estonian consumers haven’t significantly reduced spending since the Baltic country adopted the euro on Jan. 1, retailers said, following earlier concerns of a slowdown and price growth after the currency changeover.
Consumer spending so far this month has been on par with or exceeded last year’s levels at Estonia’s largest grocery chains, A-Selver AS, Maxima Eesti AS and Rimi Eesti Food, a unit of Solna, Sweden-based ICA AB, officials at the companies said.
“We were prepared for the possibility that the euro entry would make consumers more cautious,” said spokeswoman Annika Vilu of A-Selver, a subsidiary of the country’s biggest listed retailer Tallinna Kaubamaja AS.
Estonia this month became the first former Soviet republic to adopt the euro, with Estonian kroons converted at an exchange rate of one euro for 15.6466 kroons.
“This didn’t happen and sales in January have exceeded comparative figures from the last two years, which probably shows rising confidence and proves that Estonians adapt quickly,” Vilu said today in an e-mailed response to questions.
Estonian consumer confidence improved in January to 1 from minus 6 in December, the best result since July 2007 before a local property bubble burst, the Estonian Institute of Economic Research said on Jan. 25.
The country’s recovery from the second-deepest recession in the 27-member European Union in 2008 and 2009 depends on how domestic demand recovers in coming quarters as demand for exports may slow, the central bank and Finance Ministry said in November. The national statistics office is due to report January retail sales figures on Jan. 31.
“Positive assessments from companies show the feared cooling down in consumption due to the euro entry has been smaller than expected,” Nils Vaikla, an analyst with LHV Pank, said by e-mail. “Consumer sentiment has risen due to clearly improved economic growth forecasts, but probably also because the fears linked to euro adoption didn’t materialize.”
Estonia’s government expects the country’s economy to expand 4 percent this year, mainly helped by exports, following forecast growth of 2.5 percent in 2010, Finance Minister Juergen Ligi said on Jan. 19.
Private consumption probably declined 0.9 percent last year, following an 18.8 percent plunge in 2009, according to central bank forecasts in September. Spending has been hampered as unemployment remains at 15.5 percent and inflation rose to an annual 5.7 percent in December, the fastest pace in two years.
“Revenue in January so far has been slightly bigger than a year ago and there have been somewhat more clients in our stores than at the beginning of last year,” said Erkki Erilaid, the spokesman for Maxima Eesti, a unit of Maxima Group, the biggest retailer in the Baltic states. “We thought revenue might fall a bit more in January from December than in past year, but probably not as much as in Slovakia.”
Retail sales in Slovakia, which adopted the euro in January 2009, fell an annual 6.5 percent in January 2009 and 14.6 percent the following month, the most since at least January 2008, according to Bloomberg data.
“January sales have positively surprised us,” said Silver Saga, a manager with Prisma Peremarket AS, an Estonian unit of Finnish cooperative retailer SOK. “Sales volumes in the first three weeks across comparable units have shown a significant increase.”