TALLINN - Indrek Neivelt, CEO of the Hansabank Group, the largest financial house in the Baltics, said in an interview this week that with interest rates as low as they are Balts are unlikely to start saving anytime soon and that companies hoping to survive on cheap labor were in for some unpleasant surprises.
"Borrowing is a suitable motto for consumers and enterprises alike now," Neivelt told the Postimees daily. "Given the interest rates that we have, which give you a 2 percent yield on a deposit and make a loan available at 3.5 percent [annual interest], no one's going to save - because inflation is higher."
Due to European Union membership wages are growing, leaving more and more cash at people's disposal after making loan payments, Neivelt said. He added that there was significant upward pressure on wages, and that if a person doesn't like what is offered in Estonia, he can go to Ireland or Finland to work.
According to the banker, for some unknown reason employers have been slow to learn the impact of free movement of labor, whereas workers got it already three months ago.
"Those who built their business plan on cheap labor won't thrive for long," Neivelt said. "Although I do not see any big upheavals ahead for the Estonian economy, we'll apparently be hearing more often in the new year about companies with cheap labor winding up their business."
Neivelt said there was no risk that loan quality would deteriorate significantly.
"We have spread our risks in such a way that a mere half of our loan portfolio is linked with Estonia. The Baltic economies are not very much linked with each other. If something goes down somewhere, in another place there may be a rise," he said.
Neivelt said he expected Estonia to be able to export more in the future.
"Last year's nearly 6 percent economic growth was too much based on loan growth and [at the same time] too small. At this point we are building a relatively expensive and big machinery in Estonia, relying on low export and foreign money," Neivelt said.
