The consumer boom, at its height only a few years ago, has passed, according to Bank of Estonia statistics that show a 20 percent increase in savings in the past 10 months alone.
On average, the Estonian household saves approximately 38,000 kroons, about 18,000 kroons per person. The sum of deposits in Estonian banks is nearly 26 billion kroons, up 4.5 billion kroons since January, central bank statistics said.
The surge in savings is mainly accredited to the population's fear of economic instability, analysts say.
"In the last couple of years, it has been the kind of economic cycle that brings such behavior," Margus Kisel, Hansapank analyst, said. "The economy is slowing down and the future may not be bright, so people think more of the future and save."
Compared to their European counterparts, Estonians are not far off in their savings habits. A 1996 Eurostat report calculated 1,808 euros as the average savings of a European Union member. Italians topped the 15 nation list saving about 50 percent more than their neighbors, while the Danes saved the least, 60 percent less than other Europeans.
By these latest figures available, Estonia ranks alongside the Swedes and Finns, saving less than 40 percent of the European average.
A 1998 survey by the Estonian Institute of Economic Research revealed that Estonians rate the state of the economy as poor, even though average household incomes have risen. From 1997 to 1998, incomes grew over 15 percent.
In the same survey, reports the Ministry of Economic Affairs, 56 percent of Estonians said they were just making ends meet, and 21 percent said they were living on credit or prior savings.
Paavo Pold, senior analyst at Suprema Investments, said the stock market crash in 1997 resulted in many Estonians shying away from riskier investments, more uncertain about the safety of the bourse and settling for personal savings accounts with relatively high interest rates.
"In Estonia, the vast majority still keep their money in bank deposits," Pold said. "People's perception of risk changed in 1997. The amount of people who actively invest in bonds and stocks has been greatly reduced."
Besides staying at bay from risky business, Pold said that regulation of the stocks and bonds markets also keeps people away from investing there.
"The product range is out there," Pold said referring to the availability of mutual funds, bonds and other investor options. But, "if we look at the bond market it is not readily available for the small investor," he said.
Recent statements by the president of Tallinn's stock exchange indicate a move to make it easier for small investors to enter the market. Additionally, some bourse monitors have said Baltic accession negotiations with Norex, the alliance of the Stockholm and Copenhagen exchanges, will also open up the exchanges to more investors.
The recent trend to save more isn't necessarily harmful to Estonia, Pold said, as inflation remains low.
Whereas some economists worry about the United States' current spending rate—on average U.S. households save only one-third of the amount that those in Japan, Germany and Italy do—and others are concerned at the hyper-frugal culture of Japan, where consumer spending is down 4 percent and savings equal over $10 trillion, Pold doesn't see harm in the current trend to save.
"In a country like Estonia, more savings is always a better thing. We are a small and open economy," Pold said. "If you look at the size of economy, the bulk of the funding still has to come from abroad. Foreign investments still remain a very important and integral part of the economy."
However, some analysts do see fallout for the retail market as consumers choose to keep their kroons in their pockets.
"Some sectors will hurt, like retail stores and such. It is best to keep the balance between saving and spending," Kisel said.
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